Asia’s top chip stocks tumbled yesterday, ensnared in an escalating US-China tech race that has erased more than US$240 billion from the sector’s global market value.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, plunged a record 8.3 percent, while Samsung Electronics Co and Tokyo Electron Ltd also declined.
The selloff spread to the foreign-exchange market as investors tally up the damage from the sweeping curbs the US is imposing on companies that conduct technology business with China.
Photo: RITCHIE B. TONGO, EPA-EFE
The measures imposed by the administration of US President Joe Biden erect barriers of entry to China’s market by limiting the ability of US firms to sell equipment and tech to their Chinese counterparts. There are concerns that the restrictions could spread if Washington widens the initiative to include other countries, while questions also remain over the scope and final impact of the moves.
“It is difficult to call a bottom on the performance of the chip sector,” Global CIO Office chief executive officer Gary Dugan said. “The big story is that the West is becoming profoundly more concerned about security around any form of technology. We see no reason to re-enter the sector for the moment despite the profound poor performance.”
US chip stocks were on track to decline for a third day, with Nvidia Corp, Advanced Micro Devices Inc, Qualcomm Inc and Texas Instruments Inc all down more than 1 percent yesterday before the bell.
Chip toolmaker ASML Holding NV traded down 2.3 percent in Amsterdam, bringing three-day losses to more than 11 percent.
The US announced the export curbs on Friday and there have been suggestions that similar actions might be deployed in other countries to ensure international cooperation.
The announcement spurred a two-day rout of more than 9 percent in the Philadelphia Stock Exchange Semiconductor Index, which closed on Monday at its lowest level since November 2020.
Samsung lost as much as 3.9 percent, the most in a year, while SK Hynix Inc, one of the world’s largest makers of memory chips that has facilities in China, slid 3.5 percent before paring losses.
In Tokyo, Renesas Electronics Co shed almost 6 percent, with Tokyo Electron losing a similar amount.
The current rout has already wiped out more than US$240 billion from chip stocks worldwide since Thursday’s close, data compiled by Bloomberg showed.
The selloff extended to currency markets, with the South Korean won sliding as much as 1.8 percent versus the greenback while the New Taiwan dollar declined 0.7 percent.
The curbs are a “big setback to China” and “bad news” for global semiconductors, Nomura Holdings Inc analyst David Wong (黃作慶) wrote in a note on Monday.
China’s localization efforts might also be “at risk as it may not be able to use advanced foundries in Taiwan and [South] Korea,” Wong wrote.
Shares of Chinese chipmakers extended their recent losses yesterday, with Morgan Stanley saying that the broader restrictions around supercomputers and multinational capital investment in China could be “disruptive.”
The New Taiwan dollar is on the verge of overtaking the yuan as Asia’s best carry-trade target given its lower risk of interest-rate and currency volatility. A strategy of borrowing the New Taiwan dollar to invest in higher-yielding alternatives has generated the second-highest return over the past month among Asian currencies behind the yuan, based on the Sharpe ratio that measures risk-adjusted relative returns. The New Taiwan dollar may soon replace its Chinese peer as the region’s favored carry trade tool, analysts say, citing Beijing’s efforts to support the yuan that can create wild swings in borrowing costs. In contrast,
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