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    Nikkei 225 Extends Losses Amid Global Tech Rout

    January 28, 2025

    Key Points

    • Nikkei 225 fell 2.67% to close at 39,288.15, hitting an intraday low of 38,883.15.
    • Semiconductor stocks like Advantest and Tokyo Electron dragged the index lower.
    • A stronger yen weighed on exporters, exacerbating losses across the board.

    Japan’s Nikkei 225 dropped 2.67% on Monday, closing at 39,288.15, as heavyweight tech stocks mirrored the global sell-off in semiconductor shares. The index hit an intraday low of 38,883.15, reflecting intensified selling pressure throughout the session.

    The market decline was triggered by a historic 9.2% drop in the U.S. Philadelphia Semiconductor Index (SOX), as fears over competition from Chinese AI technologies rattled global tech investors.

    Tech Stocks Lead Declines Amid Semiconductor Rout

    In Japan, chip-testing equipment maker Advantest (6857) tumbled 10%, marking the steepest loss among Nikkei components. Similarly, chip-making equipment firm Tokyo Electron (8035) declined 5.3%, while tech-focused SoftBank Group (9984) dropped 6%, further dragging down the index.

    The sell-off was prompted by Chinese AI startup DeepSeek, which introduced an advanced AI assistant leveraging cheaper chips and lower data requirements, raising fears of diminished demand for high-end semiconductors.

    The yen strengthened nearly 1% against the U.S. dollar, reaching its highest level since mid-December. A stronger yen erodes exporters’ profits when repatriated, further weighing on sentiment for stocks with global exposure.

    Technical Analysis

    Picture: Japan’s Nikkei 225 stabilises near 39,288 after sharp sell-off, as seen on the VT Markets app.

    The Nikkei 225 is currently trading at 39,288, consolidating after recent volatility. The index navigates between critical technical levels, with short-term movement below the 5-day moving average at 39,772, indicating slight downward pressure.

    The 20-day moving average at 39,406 suggests a neutral to slightly bearish medium-term outlook, while the 50-day average at 39,233 provides some lingering bullish sentiment as the current price holds just above it. However, the MACD reveals bearish momentum, with the line below the signal and a negative histogram reinforcing the cautious tone.

    BOJ Policy Impact and Financial Sector Gains

    Strategist Kazuo Kamitani of Nomura Securities noted that the Nikkei’s decline resembled market swings seen after the BOJ’s policy rate hike in July. Still, he highlighted that the U.S. economy’s relative strength and the BOJ’s less hawkish stance could limit further losses.

    With the Nikkei 225 under pressure from global tech disruptions and yen strength, near-term risks remain skewed to the downside. However, resilience in financial stocks and retail names could offer a cushion against steeper losses.

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