TOKYO ⸺ Asian shares headed lower on Friday as profit-taking in Taiwanese chip giant TSMC, despite record profits, weighed on other tech firms and broader risk sentiment, while a more dovish U.S. rates outlook kept bond yields near multi-month lows.
The lead for Europe was mixed with futures for Eurostoxx 50 and Spain’s IBEX barely changed, Germany’s Dax futures up 0.1%, while those for London’s FTSE rose 0.3%.
MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.4%, weighed by a 0.8% drop each in China’s blue-chip index and Taiwanese shares after TSMC’s earnings on Thursday.
TSMC, Asia’s biggest firm by market capitalisation outside China, fell almost 4% following its earnings on Thursday.
While the world’s largest contract chipmaker posted record quarterly sales and forecast higher revenue, investors took profits, fearing its best times could already be behind it.
“Its earnings were excellent and to me, the market seems to be a bit overreacting,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. “But the fall in its profit margin led to the view that its growth momentum might be peaking out.”
TSMC’s fall weighed on many other semiconductor related shares in the region, with South Korea’s Kospi down 0.4% and Japan’s Nikkei losing about 1%.
Weakness in chip-related shares also helped bring down the S&P 500 0.33% and the Nasdaq Composite 0.70% on Thursday.
While those indexes remained near record levels, supported by the prospects of an economic recovery, investors were turning wary on riskier, less liquid assets.
The Russell 2000 index of U.S. small cap shares dropped 0.6% to a near two-month low. Once-booming special purpose acquisition companies (SPACs), or “blank check companies”, were completely out of favour, with Ipox Spac index hitting a seven-month low.
Investors instead flocked to bonds, after Federal Reserve Chair Jerome Powell reiterated that rising inflation is likely to be transitory and that the U.S. central bank would continue to support the economy.
Powell on Wednesday pledged “powerful support” to complete the U.S. economic recovery from the coronavirus pandemic, a message he repeated on Thursday.
The 10-year U.S. Treasuries yield fell to 1.302%, edging near five-month low of 1.250% touched last week.
The yield on inflation-protected U.S. bonds fell to minus 1.043%, a five-month low.
Bond yields fell even as data earlier this week showed U.S. consumer inflation hitting its highest in 13 years.
“Short positions in bonds simply don’t work, so much so that you just lose vigour,” said Arihiro Nagata, general manager of global investment at Sumitomo Mitsui Bank. “You can’t fight the Fed when there is such a massive easing.”
In foreign exchange, major currencies were little changed on the day but the dollar headed for its best weekly gain in about a month.
“Delta variants are raging in countries where vaccination is limited. In a way, the dollar and U.S. assets appear to be bought as a hedge against that,” said Sumitomo Mitsui’s Nagata.
The kiwi was the biggest mover amongst majors in the Asia session, and was last up 0.6% at $0.7020.
Gold on the other hand hit a one-month high of $1,834.3 per ounce and last stood at $1,825.4, supported by a dovish Fed.
Oil prices were heading for their biggest weekly drop since at least May as expectations of more supplies spooked investors, with OPEC likely to add output to meet a potential revival in demand as more countries recover from the pandemic.
U.S. crude futures fell 32 cents to $71.33 per barrel, near last week’s low of $70.76. Brent futures slipped 35 cents to $73.11 per barrel.
Reporting by Hideyuki Sano; Additional reporting by Swati Pandey; Editing by Sam Holmes; Reuters