Plunge in Asia's tech shares sows doubts over world-beating rally

Slump refocuses attention on underlying cracks, amid concerns about overheating

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The MSCI Asia technology gauge slid as much as 4.2 per cent on Nov 5, as the Kospi plunged up to 6.2 per cent. Analysts say Asia's outsized losses reflect the extreme concentration of tech giants in regional benchmarks. PHOTO: EPA

(EPA)

The sudden slump in Asia's technology shares last week has jolted investors, serving as a stark reminder that the world-beating rally in artificial intelligence (AI) and semiconductor stocks may be nearing a short-term crest.

The region's sharpest decline since April - triggered by a tech-led selloff on Wall Street - has refocused attention on cracks beneath the surface: the rally's narrow breadth, heavy reliance on retail traders and growing uncertainty around the timing of Federal Reserve interest rate cuts.

Last week's "selloff is a reminder that Asia's market structure is just more vulnerable", said Ms Charu Chanana, chief investment strategist at Saxo Markets in Singapore.

"Further corrections will come. The trigger, in my opinion, was extended valuations, and we have not corrected that. So the Asia chip market is likely to be volatile."