Nikkei gives up early gains after chip industry-related stocks decline

The Japanese Nikkei index struggled to maintain its early gains and ultimately closed lower on Thursday, with chip-related companies bearing the brunt of the decline. This downturn was notably influenced by the subdued annual revenue estimates reported by the British chip design company, Arm Holdings, which fell short of market expectations.

After initially rising by 0.5 percent in the session, the Nikkei index retreated by 0.34 percent to 38,073.98 points by the close of trading. Shuji Hosui, chief strategist at Daiwa Securities, attributed the downturn to widespread selling in Tokyo Electron shares and other chip-related stocks, following Arm Holdings’ disappointing revenue forecasts.

Arm Holdings’ announcement of below-expectation full-year revenue estimates resulted in a roughly 10 percent decline in its Frankfurt-listed stock on Thursday. Consequently, shares of Tokyo Electron, a prominent Japanese chip manufacturing equipment producer, tumbled by approximately three percent, exerting significant downward pressure on the Nikkei index.

SoftBank Group, which holds a substantial stake of about 90 percent in ARM Holdings, also experienced a decline of about three percent in its shares.

Despite the Nikkei’s decline, the broader Topix index managed to eke out a 0.26 percent gain, closing at 2,713.46 points.

In the broader market sentiment, over 1,600 companies listed on the main market of the Tokyo Stock Exchange witnessed mixed fortunes, with 1,081 stocks recording gains while 519 stocks registered declines.

The summary of the Bank of Japan’s monetary policy meeting held in April revealed a hawkish stance among policymakers, with many advocating for a gradual increase in interest rates. This sentiment was reflected in the rise of the yield on 10-year Japanese government bonds to 0.91 percent, marking its highest level since April 26.