Key Takeaways:
- Livermore China ADR index fell 2% to 9,013.24 points on July 24
- Chip stocks UMC and ASE Technology each lost more than 7%
- Index has shed over a third of value from its June peak
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Livermore China ADR index slides 2% as chip stocks lead selloff
The Livermore China Stocks Leaders Index slid 2% to 9,013.24 on July 24, as semiconductor stocks led a broad selloff in US-listed Chinese ADRs.
"The selloff in Chinese ADRs reflects growing concerns about competition in the semiconductor space, particularly as China advances its domestic chipmaking capabilities," said Dorian Carrell, head of multi-asset income at Schroders.
Among the worst performers, Meihua Chuangfu tumbled 9%, Enhanced Group Inc. fell 8.6%, United Microelectronics Corp dropped 8.6%, Silicon Motion Technology lost 7.5% and ASE Technology Holding declined 7.1%. The declines mirrored a broader rout in Asian chipmakers that deepened later in the week, with South Korea's KOSPI diving more than 10% on July 28 and triggering a circuit breaker.
The index has shed more than a third of its value from a peak in June, when it had more than tripled over the prior 12 months. Investors are now questioning the profitability of the semiconductor sector in Asia, with AI-linked stocks facing multiple bouts of selling on stretched valuations and concerns about circular funding in the industry.
The selloff coincided with two catalysts: a report that China had begun manufacturing domestically developed immersion deep ultraviolet lithography machines, and the strong stock-market debut of Chinese memory chipmaker CXMT, which fueled concerns about increased competition in the memory chip industry. The broader weakness in Chinese equities tracked Wall Street's overnight session and was compounded by a continued drop in oil prices, which fell 5% to a two-week low after Washington suspended airstrikes on Iran. The yield on benchmark US 10-year notes fell 3.9 basis points to 4.6%, while the offshore yuan traded near 7.25 against the dollar.
Traders are now focused on the Federal Reserve's interest rate decision on Wednesday, with fed funds futures pricing a 32% chance of a hike, down from 38% a day earlier. A surge in oil prices last week, driven by renewed fighting in the US-Iran conflict, had raised expectations of a possible rate increase as policymakers grapple with inflation that remains above the Fed's 2% annual target.
This article is for informational purposes only and does not constitute investment advice.
