Nikkei continues decline as tech follows Wall Street's slump

Nikkei drops: Japan's Nikkei share average saw its second consecutive decline on Wednesday as traders sought to lock in profits following the index's recent surge to an all-time high. 

The tech-heavy Nasdaq's overnight drop further weighed on market sentiment.

Stocks faced pressure from the overnight slump in technology shares on Wall Street, with precision machinery and electric machinery among the bottom performers on the Tokyo Stock Exchange's 33 industry groups.

The Nikkei slipped 0.2 per cent to 40,017.31, with chip-related shares such as Renesas, Lasertec, and Sumco experiencing the largest percentage declines, each losing more than 3 per cent.

Conversely, the broader Topix index rose by 0.14 per cent, with value shares gaining 0.45 per cent, while growth shares fell by 0.17 per cent.

In the US, all of the major equity indexes experienced declines of more than 1 per cent, with the Nasdaq falling the most.

The Philadelphia SE Semiconductor Index dropped by more than 2 per cent.

Despite the recent decline, the Nikkei remains up nearly 20 per cent in 2024, primarily driven by the surge in tech shares amid global enthusiasm over artificial intelligence (AI).

A weakening yen, down about 6 per cent this year, has also made Japanese stocks more appealing to foreign funds, which have largely fueled the rally.

Kazuo Kamitani, an equity strategist at Nomura Securities, noted that after the notable rally since the beginning of the year, the market appears to have entered a period of adjustment. 

He anticipates this adjustment phase to continue until the Bank of Japan and Federal Reserve policy meetings in the following weeks.

As long as the Nikkei remains above 39,000, it suggests a strong market, according to Kamitani.

Among the notable decliners on Wednesday, SoftBank Group, an AI-focused startup investor, dropped by 1.42 per cent, while Uniqlo store operator Fast Retailing lost more than 1 per cent, becoming the Nikkei's largest drags in terms of index points.

(With Reuters Inputs)