Japan's Nikkei 225 index fell sharply on Thursday, dragged down by a heavy sell-off in artificial intelligence (AI) and chip-related shares, even though the vast majority of the index's constituent stocks advanced.
The tech-heavy Nikkei closed down 1.8%, weighed down by chip equipment makers Advantest Corp and Tokyo Electron Ltd, which plunged 14.7% and 9.4% respectively.
Among the 225 constituents of the Nikkei, 161 rose and 64 fell. The broader Topix index gained 1.2%, with 25 of its 33 sector sub-indexes advancing, led by a 11.8% surge in the transportation equipment sector and a 7.2% jump in real estate.
The Democratic Party's landslide victory in the U.S. midterm elections served as the catalyst for the tech sell-off, as the market bet that the Democrats would slow the pace of AI data center expansion. Other sectors such as real estate and retail, however, benefited as investors rotated their positions.
Toyota Motor Corp stood out, with its shares soaring 16.7% after the company raised its profit forecast. The automaker lifted its annual profit outlook and increased shareholder returns on the back of strong demand for hybrid vehicles. The world's largest automaker said on Thursday that it would raise its operating profit forecast for the fiscal year ending March 2027 by 15% to 3.9 trillion yen ($24.7 billion).
For the three months ended September 31, its earnings rose 34% to 1.1 trillion yen, beating expectations, marking the first increase in six quarters. Combined with an expanded share buyback plan, the upbeat outlook helped ease concerns over issues such as the Iran war and U.S. tariffs.
Toyota Motor Corp expanded its share buyback program by 300 billion yen to 1.3 trillion yen ($8.2 billion). The maximum number of shares to be repurchased will rise to 610 million, up from the 500 million announced in August. Toyota will launch a tender offer at 2,725 yen per share to buy back its own stock.
In addition, as the Democratic Party secured an overwhelming victory in the U.S. midterm elections, expectations for tariff relief intensified, and auto-related stocks across Asia generally posted strong gains today. Fast Retailing Co Ltd, the operator of Uniqlo stores, rose 4.7%, driving the retail sector up 5.1%.
The broader market was also buoyed by a drop in crude oil prices after U.S. President Donald Trump said voters' dissatisfaction with the Iran war led to his Republican Party's defeat, strengthening market bets on an early end to the conflict. Resource-poor Japan relies on imports for almost all of its energy needs, mainly from the Middle East.
The shipping sector was the worst performer, falling 6.9%, as freight rates could decline if the Middle East conflict eases.
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