Japan's Nikkei plunges by most in seven months on tech selloff

Japan’s Nikkei share average sank by the most in more than seven months on Tuesday (Nov 18), as investors sold off tech stocks following Wall Street’s sharp decline overnight.

The index dropped 3.2 per cent to close at 48,702.98, posting its sharpest daily decline since April 9. The broader Topix sank 2.9 per cent.

Since fiscal dove Sanae Takaichi’s election as the prime minister last month, expectations for expanded economic stimulus have driven sharp gains in Japanese shares, with the Nikkei touching an intraday record of 52,636.87 on Nov 4.

“Once the Nikkei fell below the key 50,000 level, sentiment worsened and the sell-off accelerated,” said Seiichi Suzuki, chief equity market analyst at Tokai Tokyo Intelligence Laboratory.

“Some investors wanted to buy shares on a dip, but even they waited for shares to fall further.”

US stocks ended sharply lower on Monday, with the S&P 500 and the Nasdaq closing below a key technical indicator for the first time since late April as investors braced for quarterly results from retailers and Nvidia and awaited a long-delayed US jobs report this week.

Nvidia, the world’s largest company by market value and which is at the heart of Wall Street’s artificial intelligence trade, is due to report after the bell on Wednesday.

SoftBank Group fell 7.5 per cent, while chip-related Tokyo Electron and Advantest lost 5.5 per cent and 3.7 per cent, respectively.

“Positive factors that had driven the market rally have weakened, such as AI growth and expectations for US rate cuts,” said Naoki Fujiwara, a senior fund manager at Shinkin Asset Management. “The worsening relationship between Japan and China is also weighing on sentiment.”

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Fibre optic cable makers, beneficiaries of AI trade, fell, with Fujikura and Sumitomo Electric Industries losing 9.9 per cent and 9.1 per cent, respectively. REUTERS

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