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Asia stocks extend fall after US inflation jolts markets

Taiwan market slides 10% in a matter of days

A man looks at stock market monitors in Taipei. The market has fallen sharply this week.   © Reuters

TOKYO/TAIPEI -- Asian stock markets dropped further on Thursday morning, extending a run of losses as investors fret over rising global inflation.

A sharp jump in U.S. consumer prices fueled market concerns over inflation and a possible rise in interest rates. April's 4.2% year-on-year rise in the consumer price index was the sharpest since 2008.

Following falls on Wall Street on Wednesday, Asian indexes also moved lower as investors turned away from the tech stocks that have underpinned a market rally for much of the past year.

Rising inflation is seen as particularly bad for tech stocks, whose appeal to investors depends more on expected future earnings.

In Japan the equity benchmark Nikkei Stock Average closed down for the third straight day, falling 699 points, or 2.5%, to its lowest level in over four months. The benchmark's gains for 2021 have nearly been wiped out. The broader Topix index dropped over 1%, while the startup-concentrated Mothers index slipped nearly 3%.

Shares in SoftBank Group fell nearly 8%, hitting their lowest level in over three months, with investors worried about the valuations of the tech stocks in its portfolio. The fall came a day after the tech investor reported record annual earnings for a Japanese company of almost $46 billion, buoyed by gains on its investments over the past 12 months.

Other Asian benchmarks also fell. In Taiwan, where the tech-heavy market fell more than 8% at one stage on Wednesday and ended the day down more than 4%, losses continued on Thursday. The Taiex closed down 1.46%.

The benchmark has sunk over 10% since its recent high in late April as COVID-19 worries dampen the island's economic outlook and weigh on investor sentiment. As the number of domestic infections rises, Taiwan's health authorities have warned that the strictest social restrictions the island has imposed during the pandemic could be on the way.

South Korea's Kospi index closed down over 1%.

Hong Kong’s Hang Seng Index declined 1.8% and is at the lowest level since early January. It has declined in five of the last  seven sessions. Only five of the index’s 55 components rose.

Declines were led by tech stocks, with Alibaba Group Holding and Tencent Holdings sliding over 3%.

China’s CSI 300 Index, which tracks the largest listed companies in Shanghai and Shenzhen, was down 1%. Ping An Insurance Group dropped 1.1% and spirits maker Kweichow Moutai fell 0.6%.

The MSCI Asia Pacific Index fell 1.4% and is near the lowest level for the year.

"A recovery environment with rising inflation should benefit cyclical sectors, such as financials, materials and industrial companies," said Tai Hui, Chief Asia Market Strategist, J.P. Morgan Asset Management. "Hence, the pressure on tech and health care could continue for some time."

Additional reporting by Narayanan Somasundaram in Hong Kong

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