On Thursday (July 25th), the Japanese stock market experienced its worst drop in more than three years. The sell-off of global technology stocks caused investors to turn to safer assets and dampened the AI-driven rebound. Product structure, 10-30 billion yuan products operating income of 401/1288/60 million yuan respectively.
At the close, the Nikkei 225 index fell 3.28%, or 1,285.34 points, to close at 37,869.51 points, marking the largest daily decline since June 2021, and a drop of about 10% from its historical high two weeks ago. The broader Topix index fell 83.26 points, or 2.98%, to 2,709.86 points, with export companies like Hitachi Limited and Nissan Motor falling as well. #Japanese market#
In the primary market, the stocks with the biggest declines were those of electrical appliances, securities companies and insurance companies.
The Nikkei 225 stock average index of Japan has entered a technical correction stage due to the AI-driven rebound reversal of technology stocks, while the market is also concerned that the Bank of Japan may be preparing to raise interest rates.
Tech stocks on Wall Street suffered a heavy blow.
On Wall Street, the Nasdaq index plummeted nearly 4%, marking the worst single-day drop since 2022. The disappointing performance of Alphabet, Google's parent company, and Tesla undermined confidence in the 'Magnificent Seven' tech giants.
Driven by expectations of a Fed rate cut and skepticism about the short-term impact of AI, the decline of large tech stocks has prompted investors to shift their focus to other sectors.
The strengthening of the Japanese yen has further weighed on the market.
Tomo Kinoshita, global market strategist at Invesco Asset Management Japan, told Bloomberg: "There is no doubt that today's sharp drop in the Nikkei index was triggered by the drop in the US stock market. But the possibility of the Bank of Japan raising interest rates at its July meeting has increased, causing the yen to appreciate sharply and stocks relying on exports and borrowing to fall.
Due to the expected narrowing of the interest rate gap between Japan and the United States, the yen has continued to strengthen over the past two weeks. At next week's policy meeting, the Bank of Japan is likely to reduce its bond purchase plan.
Semiconductor stocks, which are more volatile, were hit the hardest, with Tokyo Electron falling as much as 6.2% on concerns that its rebound may have been excessive. The Nikkei Volatility Index rose to 22.57, its highest level since April.
"We see overall correction, and as Nikkei volatility rises, risk aversion trends are intensifying," said Masahiro Yamaguchi, senior market analyst at SMBC Trust Bank.
Earlier this year, the Nikkei 225 index broke through its 1989 high, and market optimism was high that Japan may finally shake off decades of deflation and have confidence in corporate efforts to improve shareholder returns.
Hebe Chen, an analyst at IG Markets Ltd, said: "As Wall Street sees its worst day of the year, concerns about the upcoming correction will inevitably dominate the trader's thinking."
Next week, Apple, Microsoft, Amazon, and Meta will release key earnings reports, and markets are expected to see further volatility.
In terms of economic data, Japan's private sector reported "steady growth" in July, with the composite purchasing managers' index (PMI) rising from 49.7 in June to 52.6, according to S&P Global data. Despite a slight decline in manufacturing, the index remains above the growth threshold.
Softbank's stock fell 7.2% as its subsidiary Delaware Project 6 announced plans to distribute $2.06 billion in dividends, which will be booked as revenue of JPY 326.6 billion in the fiscal year ending in March 2025.
In addition, Kudan's stock price fell 3% as SIA SQR (aka Squad Robotics) announced plans to integrate Kudan's 3D-Lidar SLAM technology into its autonomous floor cleaning robots.