TOKYO, RAW – Asian shares headed lower on Friday as profit-taking in Taiwanese chip giant TSMC, despite record profits, weighed on other tech firms and broader risk sentiment, while a more dovish US rates outlook kept bond yields near multi-month lows.

MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.35 per cent, weighed by a 1.2 per cent fall in Taiwanese shares after TSMC’s earnings on Thursday.

TSMC, Asia’s biggest firm by market capitalisation outside China, fell almost 4 per cent following its earnings on Thursday.

While the world’s largest contract chipmaker posted record quarterly sales and forecast higher revenue for the current quarter, investors took profits, fearing its best times could already be behind it.

“Its earnings were excellent and to me, the market seems to be a bit overreacting,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

“But the fall in its profit margin led to the view that its growth momentum might be peaking out.”

TSMC’s fall weighed on many other semiconductor related shares in the region, with South Korea’s Kospi down 0.6 per cent and Japan’s Nikkei losing 1.1 per cent.

Weakness in chip-related shares also helped to bring down the S&P 500 0.33 per cent and the Nasdaq Composite 0.70 per cent on Thursday.

While those indexes remained near record levels, supported by the prospects of an economic recovery, investors were turning wary on riskier, less liquid assets.

Russell 2000 index of US small cap shares dropped 0.6 per cent to a near two-month low. Once-booming special purpose acquisition companies (SPACs), or “blank cheque companies”, were completely out of favour, with Ipox Spac index hitting a seven-month low.

Investors instead flocked to bonds, after Federal Reserve Chair Jerome Powell reiterated that rising inflation is likely to be transitory and that the US central bank would continue to support the economy.

Powell on Wednesday pledged “powerful support” to complete the US economic recovery from the coronavirus pandemic, a message he repeated on Thursday.

The 10-year US Treasuries yield fell to 1.302 per cent , edging near five-month low of 1.250 per cent touched last week.

The yield on inflation-protected US bonds fell to minus 1.043 per cent, a five-month low.

Bond yields fell even as data earlier this week showed US consumer inflation hitting its highest in 13 years.

“Short positions in bonds simply don’t work, so much so that you just lose vigour,” said Arihiro Nagata, general manager of global investment at Sumitomo Mitsui Bank. “You can’t fight the Fed when there is such a massive easing.”

In foreign exchange, major currencies were little changed on the day but the dollar headed for its best weekly gain in about a month.

“Delta variants are raging in countries where vaccination is limited. In a way, the dollar and US assets appear to be bought as a hedge against that,” said Sumitomo Mitsui’s Nagata.

The euro changed hands at $US1.1807 ($A1.5907) while the dollar traded at 110.03 yen.

Gold on the other hand hit a one-month high of $US1,834.3 ($A2,471.3) per ounce and last stood at $US1,831.3 ($A2,467.3), supported by a dovish Fed.

Oil prices stayed under pressure after a compromise deal between leading OPEC producers and a surprisingly poor weekly reading on US fuel demand.

Reuters reported on Wednesday that Saudi Arabia and the United Arab Emirates had reached an accord that should pave the way for a deal to supply more crude to a tight oil market.

A deal has yet to be finalised and the UAE energy ministry said deliberations are continuing.

US crude futures stood at $US71.70 ($A96.60) per barrel, near last week’s low of $US70.76 ($A95.33).

Brent futures traded at $US73.54 ($A99.08) per barrel.