Major indices in Asia fell to their lowest in over six months on November 4 as key technology stocks declined amid early indications of a Democratic win in the US midterm elections, which could slow down artificial intelligence spending in Asia's tech-heavy markets. Among indices, Japan's Nikkei 225 fell the most and was down over 4% while the broader Topix First Section fell nearly 2%.
The MSCI Asia Pacific Index dropped as much as 2.3%, with the technology sector leading the decline. South Korea’s Kospi swung to a loss of 4% after being up as much as 3.2%. Stocks in Taiwan and Japan also declined. Singapore’s benchmark was poised to enter a correction.
Investors see a Democratic wave ushering in tighter regulatory scrutiny, particularly of artificial intelligence companies. This adds to an already difficult stretch for Asian equities as concerns grow whether the billions of dollars being poured into AI-related firms will generate sufficient returns.
“The prospect of stronger Democratic control in Congress is adding another layer of uncertainty to Asian markets,” said Dilin Wu, a strategist at Pepperstone Group Ltd. “AI regulation, chip export restrictions, and data centre energy policies could all be affected by the election outcome.”
In Japan, semiconductor-linked stocks fell, with Kioxia Holdings Corp. and Advantest Corp. down over 11% and nearly 8%, respectively, while shares of Tokyo Electron fell nearly 6%.