Asian markets suffer following US tech sell-off

Meanwhile, European markets shook off the tech correction

The sizable sell-off of technology stocks seen in the US bled into Asian markets at the end of the week’s trading.

The severity of the losses was not as severe as those suffered by the Nasdaq, which experienced its worst day since March. The Hang Seng Tech Index, which tracks the 30 largest tech companies listed in Hong Kong, fell as much as 5.3 per cent before paring losses.

Giants such as SMIC, Alibaba and JD.com closed down 3.8, 3.5 and 4.7 per cent, respectively. Korean giant Samsung suffered a smaller drop of 1.42 per cent.

Following March’s market plunge at the height of the coronavirus crisis, US tech stocks proved to be among the most resilient and attractive opportunities for investors.

By 1 September, the likes of Apple, Amazon and Facebook traded up from mid-March lows by 139, 110 and 102 per cent, respectively.

While other firms reeled from the restrictive lockdown measures imposed by governments to limit the spread of Covid-19, the technology sector was arguably boosted by the policies. Amazon reported a stark uptick in demand and companies like Zoom Video Communications addressed the global need for working from home solutions.

Unprecedented levels of support from both the US government and Federal Reserve also provided fertile ground for the technology rally.

On Wednesday, both the Nasdaq and S&P 500 indices reached all-time highs. Indeed, Apple became the first American company to surpass $2trn (£1.5trn, €1.7trn) in market value, larger than the total value of all the firms listed on London’s FTSE 100 index.

Thursday marked a cessation of this rally. Amazon fell by 4.6 per cent, Microsoft by 6.1 per cent and Zoom by 9.9 per cent. Such losses dragged the Nasdaq from its record highs to close down by almost 5 per cent.

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Both Apple and Tesla recently announced stock splits in order to attract investment from the ever-growing crowd of retail investors that have sprung up since the Covid-19 crisis began. Thursday’s dip made their stock even more affordable, with Apple losing $180bn in market value and closing down 8 per cent. Tesla, meanwhile, suffered a 9 per cent drop.

Although some have attributed the sell-off to anxiety over the continued crisis in the US job market and the nation’s post-Covid recovery in general, such reasoning can be debated. Indeed, Thursday saw a surprise fall in the number of US citizens applying for unemployment benefits, from over 1 million in the week previous to 881,000.

The more likely explanation can be found in investor desire to take some gains after a longstanding rally that was due a correction.

Despite the recent sell-off, US tech firms still trade significantly higher than their 2020 starting level and continue to benefit by being unaffected by ongoing restrictions related to Covid-19.

European markets shook off the correction at the start of Friday trading, having already suffered the day before. By mid-morning, the pan-European Euro Stoxx 50 traded up 0.66 per cent, while the FTSE 100 stood 0.79 per cent higher.

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