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Traders Dump TSMC, Samsung in Worst Day in Asia Tech Since March

Bloomberg logoBloomberg 8/20/2020 Cindy Wang and Heejin Kim

(Bloomberg) -- Asia technology shares slumped Thursday as investors reacted to a series of negative events from the simmering Sino-U.S. trade tensions to stretched valuations in the sector.

The MSCI Asia Pacific Information Technology Index slipped as much as 3.3%, the most intraday since March 23. Taiwan Semiconductor Manufacturing Co., which has the biggest weighting on the index, slid as much as 6.2%, while Samsung Electronics Co., another heavyweight, ended 4.2% lower after Nvidia Corp. suggested the growth of its data center business will slow.

There’s been “a euphoric demand” for tech stocks so far amid the spread of the coronavirus but the U.S. Federal Reserve’s minutes, which didn’t contain further monetary measures, disappointed investors holding the expensive stocks, according to Nader Naeimi, head of dynamic markets at AMP Capital Investors Ltd.

a screenshot of a cell phone: Asia technology stocks fall from a record high in early August © Bloomberg Asia technology stocks fall from a record high in early August

“Following the liquidity-driven rally recently, what we now see is disappointing comments from the Fed, U.S.’s ban on Huawei -- which may cause a retaliation from China, and falling prices of memory chips,” according to Chung Chang-Won, an analyst at Nomura Financial Investment (Korea) Co. “For those reasons, people are selling tech shares today.”

A report that Huawei Technologies Co. and ZTE Corp. will delay the deployment of 5G wireless network base stations helped fuel Thursday’s drop in Taiwan, said Diana Wu, a senior manager at Capital Securities Corp. The U.S. this week slapped fresh restrictions on Huawei, triggering a slump in some suppliers listed on the island.

“Taiwan suppliers are said to have gotten orders cut, and investors will worry about their potential earnings decline in the second half,” she said. While Taiwan component and services suppliers have been prepared for U.S. action against Huawei, they haven’t been regarding ZTE, Wu added.

Taiwan’s stock benchmark ended the session down 3.3% after tumbling as much as 5%. The gauge breached its 1990 peak last month to set a record high, helped by foreign investors putting money to work there.

a screenshot of a cell phone on a table: Prices of DRAM continue to fall in 2020 © Bloomberg Prices of DRAM continue to fall in 2020

The Huawei saga also hit Korean chipmakers such as Samsung and SK Hynix Inc., as their exports to the Chinese firm account for nearly 10% of revenues from their semiconductor businesses, according to NH Investment & Securities. Slumping memory-chip prices didn’t help either, Chung of Nomura said.

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