Can tech stocks maintain their upward momentum in Asia?

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Tech Stocks Face Uncertain Future Despite Recent Gains

Asian technology stocks experienced a rise, mirroring positive movements on Wall Street, driven by a stabilisation in long-term Treasury yields since early November. This calming of yields has bolstered the prospects for growth-oriented shares, including those in the tech sector, which are often sensitive to borrowing costs. However, analysts suggest that the current rally may be approaching its peak, with limited further room for Treasury yields to decline, a key support for the stock market.
Tech Sector Performance in Key Asian Markets

In Japan, the Nikkei index saw an increase, with shares linked to the semiconductor industry being the primary drivers of the gains. Taiwan's equity benchmark, which is heavily weighted towards technology companies, also rallied significantly. Similarly, Hong Kong's Hang Seng index recorded an advance, with technology shares outperforming other sectors.
Factors Influencing the Rally

The recent surge in tech stocks is largely attributed to the cooling of long-term Treasury yields. This trend, which began in November, has been influenced by softer labour market data in the United States, leading investors to anticipate a less aggressive stance from the Federal Reserve regarding interest rate hikes. The US 10-year Treasury yield has stabilised around 4.646 per cent, a notable decrease from its earlier high of 4.935 per cent.
Potential Headwinds for Continued Momentum

Despite the positive performance, there are indications that the upward momentum for tech stocks may not be sustained. One strategist from Nomura Securities noted that the market has been interpreting negative economic news as positive, anticipating a pause in Federal Reserve rate hikes. However, with the Treasury market having already priced in such a pause, the potential for further significant declines in Treasury yields is limited, thereby removing a crucial support for the stock market. Upcoming economic data, including US consumer price and retail sales figures, will be closely watched for further direction.

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Can tech stocks maintain their upward momentum in Asia?

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