Asian Stocks Slip as Tech Drags, Yen Near 3-Month Low Before BOJ Decision

Asian stocks slipped on Thursday, with tech shares dragging regional indices lower, as investors braced for the Bank of Japan's (BOJ) policy decision. The Nikkei lost 0.6%, while Taiwan's tech-heavy benchmark sagged 1.5%. South Korea's Kospi fell 0.9%. This trend can be attributed to a 1.1% overnight slide for Wall Street's Nasdaq Composite, which dampened investor sentiment towards tech stocks in Asia. However, gains for Hong Kong's Hang Seng and mainland blue chips helped to keep declines for MSCI's broadest index of Asia-Pacific shares to 0.3%.


The yen hovered around its 200-day moving average at 142.53 per dollar, as traders awaited the BOJ's decision. The BOJ is expected to maintain its ultra-easy monetary policy, but any hints of a shift could impact the yen's exchange rate. The dollar-yen pair has been sensitive to moves in long-term U.S. Treasury yields, which retraced about half of their overnight jump to 3.977% and last stood at 3.91% in Asian hours.


Tech shares in Asia, such as those in the Nikkei and Taiwan's tech-heavy benchmark, have underperformed recently, contributing to broader market volatility. On October 31, 2024, the Nikkei's tech shares fell 1.1%, while Taiwan's tech benchmark dropped 1.5%. This follows a 1.1% overnight slide for Wall Street's Nasdaq Composite. The correlation between tech stocks and broader market volatility is evident, with tech shares often leading market movements due to their high beta and influence on investor sentiment. As tech stocks falter, broader markets tend to follow suit, as seen in the Nikkei's 2.8% weekly decline despite a two-day rebound.


Regional governments' policies towards tech regulation and innovation significantly impact the sector's performance, particularly in Asia. Stringent data privacy laws and antitrust regulations, like those implemented in China and South Korea, have led to a decline in tech stocks. Conversely, supportive policies, such as Singapore's National AI Strategy, have fostered growth in tech companies. Japan's BOJ policy, while not directly targeting tech, influences the sector through currency fluctuations and interest rates.


Asian stocks are expected to remain volatile in the near term, with tech shares continuing to influence market movements. Investors should monitor the BOJ's policy decision and its impact on the yen's exchange rate. Additionally, they should keep an eye on tech regulation and innovation policies in the region, as they can significantly impact the performance of tech stocks and broader markets. For investors seeking stable, income-focused investments, funds like the Cohen & Steers Quality Income Realty Fund (RQI) and the XAI Octagon Floating Rate & Alternative Income Trust (XFLT) offer attractive options, while REITs like AWP and GOOD provide adaptability and reliable income-generating investments like Scotiabank offer high dividends and institutional stability.