Asian tech stocks took a hammering overnight, dragging London’s FTSE 100 into the red as a global risk-off mood swept through markets. The sell-off was led by a sharp decline in semiconductor shares after a profit warning from a major US chipmaker, which sent jitters across the sector. In Tokyo, the Nikkei 225 tumbled 2.
8 per cent, with tech giants SoftBank and Tokyo Electron among the heaviest casualties. Seoul’s Kospi index fell 3.1 per cent, its worst single-day drop in six months, as Samsung Electronics and SK Hynix lost ground.
Hong Kong’s Hang Seng index shed 2.5 per cent, dragged down by Tencent and Alibaba. The contagion quickly spread to London, where the FTSE 100 opened 1.
4 per cent lower, with tech-heavy indices bearing the brunt. The sell-off underscores the fragility of the current market rally, which has been fuelled by cheap central bank money and speculative fervour. As the tide turns, investors are remembering that tech valuations are priced for perfection, and perfection is a rarity.
The question now is whether this is a correction or the beginning of a more prolonged downturn. Given the inflationary pressures building globally, I suspect the latter. Central banks are running out of excuses to keep printing money.
The Bank of England, in particular, faces a tough balancing act: support growth or fight inflation. It cannot do both forever. The gilt market is already sniffing out higher yields, and the pound is taking a beating.
This is the moment when fiscal responsibility meets market reality. The government’s spending spree has its limits, and the bond market is the ultimate enforcer. Watch for capital flight out of emerging markets as investors seek safety in US dollars.
The Asian rout is just the first domino. London, with its reliance on financial services and international capital, is not immune. We are in for a bumpy ride.
