Chinese shares tumbled and US stock futures slid further after the record rally in global equities this year was thrown into sharp reverse by a sell-off of tech stocks.

China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks dropped 1.6 per cent, while Japan’s benchmark Topix fell 1 per cent and Australia’s S&P/ASX 200 shed 3 per cent. Hong Kong’s Hang Seng also fell 1.8 per cent.

The falls in Asia followed a frenzied day on Wall Street, where the tech-focused Nasdaq Composite index fell 5 per cent while the S&P 500 dropped 3.5 per cent.

The turnround hit top tech stocks including Apple, whose shares fell 8 per cent, wiping off more than $150bn from the company’s market capitalisation. Amazon, Alphabet and Microsoft all ended the day down more than 4 per cent.

Investors and analysts have expressed growing concern that monetary and fiscal stimulus have pushed stocks to unsustainable levels. Valuations are looking stretched with the global pandemic still spreading and no vaccine in sight while the US presidential election in November is heightening volatility.

“Market corrections are to be expected — a market fuelled by central bank largesse, economic surprises and record earnings [performance] in the last few months was never going to maintain its heady pace forever,” said Kerry Craig, global market strategist at JPMorgan Asset Management.

The sell-off in American tech stocks spread to China’s tech champions on Friday, with ecommerce group Alibaba dropping as much as 6.7 per cent and rival Tencent down as much as 3.9 per cent.

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Louis Tse, managing director of VC Brokerage in Hong Kong, said Chinese tech stocks had entered a “tailspin” after a recent rally, pointing to losses of 2.7 per cent for the China-focused Hang Seng Tech index.

“We’re seeing heavy profit-taking ahead of the weekend,” he said.

While the S&P 500 remains 7 per cent higher for the year to date and the Nasdaq Composite is up 28 per cent, futures markets tipped US stocks to fall further on Friday. The former is expected to fall another 0.4 per cent and the latter set to drop 1 per cent when trading begins on Wall Street. The FTSE 100 was expected to shed 0.4 per cent.

“It doesn’t look like much other than profit-taking. Pretty massive profits I grant you,” said Robert Carnell, head of Asia-Pacific research at ING. “This was not rotation out of stocks into bonds . . . this is not ‘risk off’ returning.”

The sell-off for equities also sent shudders through commodities markets, with oil benchmarks dropping in Asian trading.

Brent crude, the international benchmark, fell 0.8 per cent to $43.71 a barrel. Gold, which often serves as a haven in periods of uncertainty, rose 0.3 per cent to $1,936.48 a troy ounce.

Via Financial Times