Asian stocks hit by tech losses as Fitch cuts U.S. rating

Investing.com — Most Asian stocks fell on Wednesday, with technology shares seeing a heavy dose of profit-taking after an unexpected downgrade to the U.S. sovereign rating by Fitch somewhat dented sentiment.

Traders also locked in profits across broader Asian markets after stellar gains through July, tracking a similar trend on Wall Street, which closed lower overnight. 

fell in after-market trade as ratings agency Fitch unexpectedly downgraded the U.S.’ sovereign rating to AA+ from AAA, citing worsening fiscal conditions and repeated political sparring over debt payments.

While most analysts said the downgrade will have a limited direct impact on financial markets, they noted the possibility of some near-term risk aversion on the news. Fitch is the second ratings agency to strip the U.S. of its AAA rating after Standards and Poor. 

The downgrade spurred losses in most Asian markets on Wednesday, with technology-heavy indexes coming under increased pressure.

Tech stocks lead losses after strong July 

Hong Kong’s index was the worst performer for the day, sliding over 2%. Videogame developer Tencent Holdings Ltd (HK:) slid 3% after China’s cyberspace watchdog proposed even more restrictions on mobile phone usage for children and adolescents, which comprise a large portion of Tencent’s userbase. 

But the Hang Seng’s losses also came after the index jumped over 6% through July.

South Korea’s sank 1.4%, retreating from a nearly 3% bounce in the past month, while the index slumped 1.6%. Losses in major tech stocks also saw the slide 2.2%, while the index shed 1%. 

Tech had a strong run over the past month, as markets bet that a pause in U.S. interest rate hikes was imminent. But some signs of resilience in the world’s largest economy brought concerns over rising rates back into the fore, given that economic strength gives the Federal Reserve more headroom. 

The start of the Asian quarterly earnings season kept traders on edge, as markets awaited more cues on how major corporations navigated rising interest rates. 

Broader Asian markets also retreated, with Australia’s down 0.9%, while futures for India’s index pointed to a weak open. 

Chinese stocks sink as stimulus promises underwhelm 

China’s fell 0.7%, while the sank 0.8% as traders soured on Beijing’s promises for more stimulus measures.

While a slew of top-level Chinese officials vowed to roll out measures and support a slowing economic recovery, China has offered scant cues on exactly how it plans to enact said stimulus measures.

A string of weak economic readings also dented sentiment towards China this week, with the country’s biggest growth drivers, particularly manufacturing and real estate- remaining in contraction through the month.