SINGAPORE (Reuters) – Asian markets experienced a sharp decline on Wednesday, driven by a significant drop in chip stocks and growing fears over economic growth. The downturn in chip shares, including a $279 billion reduction in Nvidia’s market value, also contributed to the fall in European futures and oil prices hitting year-to-date lows.
In Asia, Japanese stocks plummeted by over 3%, while regional shares outside Japan fell nearly 2%. The safe-haven yen rose amid the market turbulence.
Here’s a roundup of insights from analysts and investors on the current market situation:
Nick Ferres, CIO, Vantage Point Asset Management, Singapore: “The recent ISM manufacturing index has dampened the previously optimistic growth outlook. While equities have reacted positively to a dovish interest rate outlook, key leading indicators suggest a potential sharp deterioration in macro conditions. This raises concerns that the S&P 500’s valuation and equity premiums may not adequately compensate for the risk, possibly leading to further declines in the coming weeks.”
Jun Bei Liu, Portfolio Manager, Tribeca, Sydney: “Investors are taking some profits off the table. Fundamentally, the equity market remains sound, with initial 25 basis point rate cuts and more anticipated. Although the economy is slowing, it’s not collapsing. The next few months may present opportunities as earnings potentially bottom out.”
Steven Leung, Executive Director of Institutional Sales, UOB Kay Hian, Hong Kong: “Hong Kong’s market is underperforming, exacerbated by negative signals from the U.S. Unlike August’s technical issues, current market weakness stems from deeper economic concerns in the U.S. This fundamental issue presents a more serious challenge than previous technical adjustments.”
Jason Teh, CIO, Vertium Asset Management, Sydney: “The critical question is how quickly the economy will slow down as the Fed cuts rates. If the Fed is behind the curve, market sell-offs may continue. The underperformance of market leaders like Nvidia, despite strong profits, suggests we may be entering a bear market if major stocks like Nvidia and Apple cannot sustain the market.”
Michael Arone, SPDR Chief Strategist, State Street Global Advisors, Boston: “I anticipate a continued shift away from technology stocks towards broader market leadership. Falling interest rates and inflation are likely to narrow the earnings growth gap between technology and other sectors.”
Sam Stovall, Chief Investment Strategist, CFRA, New York: “Investors appear to be reacting to seasonal trends and fears of declines in both September and October, compounded by election year uncertainties. This short but crucial week could be pivotal for investor confidence as they remain cautious.”
Steve Sosnick, Market Strategist, Interactive Brokers, Greenwich, CT: “There’s a noticeable post-Nvidia earnings hangover. Although Nvidia’s earnings exceeded expectations, the shrinking magnitude of these beats is concerning. The weaker ISM manufacturing report and rising VIX reflect investor anxiety about upcoming job numbers and seasonality.”
Michael Green, Portfolio Manager, Simplify, San Francisco Bay Area: “Investors are increasingly reducing exposure to Nvidia and similar high-profile stocks. This over-allocation has the potential to lead to significant sell-offs as they adjust their portfolios.”
As markets grapple with these challenges, the path forward remains uncertain, with a focus on upcoming economic data and its impact on investor sentiment
