Singapore: Global equity markets plunged sharply on Wednesday, as concerns over stretched valuations and a steep sell-off on Wall Street triggered a wave of risk aversion across Asia. Investors who had ridden a months long rally began pulling back, fearing that the market’s optimism had run too far ahead of fundamentals.
The turmoil began in the United States, where major technology stocks tumbled overnight, unsettling global sentiment. A sharp correction in high-growth tech shares once the driving force behind market gains raised alarm bells about whether valuations in the sector were sustainable. Investors, wary of overpricing, rushed to book profits after months of relentless upward momentum.
Asian equities bore the brunt of the sell-off. Japan’s Nikkei 225 plunged by nearly 4.6%, wiping out a large portion of its recent gains and pulling it more than 7% off its record high set earlier this week. South Korea’s benchmark Kospi also fell as much as 6.2% before trimming some losses later in the session. Meanwhile, the MSCI Asia-Pacific index excluding Japan dropped by about 1.2%, marking its steepest two-day decline since early April.
The downturn reflected a collective investor realization that markets had become overheated. Analysts suggested that after a prolonged rally fueled by liquidity and optimism, a correction was both expected and necessary.
The latest rout has reignited the debate over equity valuations, especially in the technology sector. Despite a slowdown in earnings growth, many tech stocks continue to trade at historically high multiples. For instance, Palantir Technologies whose stock had surged over 150% this year fell by 8% after reporting quarterly results, yet its forward earnings multiple still stood near 250 times. In contrast, Nvidia, one of the most valuable chipmakers, trades at a much lower 33 times forward earnings.
Market strategists say these figures highlight an imbalance between investor enthusiasm and underlying profitability. “It’s probably just time to take pause on the equity market rally we’ve had,” one strategist noted, hinting at a broader sentiment that the market’s exuberance may finally be cooling.
As equities tumbled, investors sought refuge in safe-haven assets though the moves were modest. The US dollar weakened slightly against the Japanese yen, settling near ¥153.36 after the release of the Bank of Japan’s September meeting minutes. US Treasury yields edged down, with the 10-year note trading around 4.058%, reflecting a mild uptick in bond demand.
Cryptocurrencies were not spared from the turbulence. Bitcoin slipped below the $100,000 mark for the first time since June before recovering slightly to $101,233. Gold, meanwhile, rebounded from a three-day losing streak to trade at $3,938 per ounce, signaling renewed interest in traditional hedges.
While most Asian markets suffered deep losses, China managed to stay relatively stable. The CSI 300 index was little changed, suggesting domestic investors were less swayed by global volatility. However, underlying economic data pointed to a slowdown: a private survey revealed that China’s services sector expanded at its slowest pace in three months, underlining the fragility of the country’s recovery.
The recent market turbulence serves as a wake-up call for global investors. After months of euphoria and record-breaking rallies, the mood has shifted toward caution. Persistent inflation, high interest rates, and global geopolitical uncertainties continue to cast long shadows over economic forecasts.
As one analyst put it, “At some point, profits need to be booked especially after the kind of run we’ve seen.” The latest sell-off may therefore represent not just a pause, but a recalibration a moment when investors step back to reassess risks before deciding the next leg of the global market journey.