Optimism surrounding a rebound in Asia-Pacific technology stocks has been tempered, as investor skepticism about the sustainability of the artificial intelligence rally resurfaces.
On Monday, Japan's Nikkei 225 index closed nearly flat at 69,737.69 points. The Topix index in Japan gained 0.9%, finishing at 4,101.96. South Korea's benchmark Kospi index declined by 0.5% to close at 8,051.33 points. Concurrently, the yield on Japan's 10-year government bond rose to 2.815%, reaching its highest level since 1996; the 20-year yield climbed to 3.785%, also a peak since 1996; and the 30-year yield increased by 3 basis points to 4.055%.
U.S. stock futures pared earlier gains, with S&P 500 futures now indicating a rise of approximately 0.1%, a notable pullback from levels seen before the U.S. market holiday on Friday. European equity futures also pointed to a lower open, following record closing highs for European stocks last Friday. The U.S. dollar strengthened, with the Bloomberg Dollar Spot Index advancing against all G10 currencies.
Fabien Yip, a market analyst at IG International, commented, "The rotation out of high-valuation technology stocks into cyclical and defensive sectors continues and is gaining traction among investors in the U.S. and Asia. This sector rotation is a healthy sign of improving market breadth after the narrow rally from April to June."
Technology Sector Rally Stalls, Rotation Persists
The recovery momentum for technology and semiconductor stocks in the Asia-Pacific markets notably decelerated on Monday. South Korea's Kospi index fell 1.4%, with chip giants Samsung Electronics Co Ltd and SK Hynix Inc both declining, with SK Hynix briefly dropping nearly 4%. SK Hynix is set to launch a $29 billion U.S. stock listing this week, a move seen as bolstering its capital advantage in the global AI memory chip race, yet pre-listing profit-taking pressure clearly weighed on its share price.
The fundamental outlook for the semiconductor industry is not entirely pessimistic. Hon Hai Precision Industry Co Ltd (Foxconn), a server assembly partner for Nvidia, reported a significant 40% year-on-year jump in quarterly sales, surpassing market expectations, and indicated that AI demand continues to expand. Samsung Electronics is also reportedly planning to raise its average selling price for DRAM in the third quarter by about 20% sequentially and has verbally notified some customers.
Market Sentiment Turns Cautious Ahead of Earnings Season
The market's entry into the second half of the year has become markedly more cautious. Kazuhiro Sasaki, Head of Research at Phillip Securities Japan, noted that recent market volatility has intensified, particularly concentrated in the technology sector, with fund managers inclined to continue reducing holdings in AI-related stocks that have significantly outperformed, gradually shifting funds into lagging sectors and value stocks. He believes industries such as automobiles, machinery, and healthcare could benefit from this rotation trend.
Investor caution towards technology stocks is expected to persist ahead of earnings reports from major chipmakers. Sasaki also pointed out that if earnings results exceed expectations, a significant market rebound is possible, given that some individual stocks have already undergone notable corrections and valuations have returned to relatively reasonable levels.
From a broader macro perspective, market focus currently centers on two main themes: first, the transmission effect of energy shocks stemming from the conflict in Iran on inflation and growth prospects; and second, whether technology companies can demonstrate in this earnings season that their AI capital expenditures are translating into substantial profit growth. Brent crude oil fell 0.6% on Monday to around $71.70 per barrel, partially alleviating market inflation concerns and contributing to strength in U.S. Treasury bonds.
Currency and Commodity Markets: Yen Under Pressure, Gold Holds Steady
In the foreign exchange market, the U.S. dollar continued its ascent. Goldman Sachs has revised its one-year forecast for the dollar-yen exchange rate upward from 155 to 165 and expressed a preference for being long carry trades. The yen traded around 161.54 in early Asian hours. The ongoing rise in Japanese government bond yields presents a contrast with the yen's weakness, reflecting the market's complex expectations regarding Japan's monetary policy path.
Gold prices held largely steady, following three consecutive days of gains, currently trading around $4,158 per ounce. Widespread expectations that the U.S. Federal Reserve will not raise interest rates in the near term are providing some support for the precious metal. WTI crude oil declined 0.4% to $68.44 per barrel, while Bitcoin gained 0.7% to $63,148.
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