Hong Kong stocks slump as AI rallies in Asia unwind on US rate-increase anxiety
Investors drive Hong Kong and other Asian markets lower as the AI trade unravels on rate-increase fears after strong reading on US jobs report
The Hang Seng Index fell 0.7 per cent to 24,790.52 as of 10.56am local time. The Hang Seng Tech Index dropped 1.6 per cent. The mainland’s CSI 300 Index slid 1 per cent, while the Nasdaq-styled Star Market 50 Index retreated 2.6 per cent.
South Korea’s Kospi index, which had more than doubled this year to emerge as the best performer among the primary markets globally, plunged more than 4 per cent, with the unwinding of leveraged trading amplifying sell-offs to trigger a brief trading halt. Taiwan’s Taiex sank 3.3 per cent and Japan’s Nikkei 225 shed 3.8 per cent.
The narrative, which has shifted to rate increases from monetary easing, is upending the AI trade in Asia, where South Korea and Taiwan are closely intertwined with the supply chain of the cutting-edge technology and China is in a deep push for technological innovation.
“Strong employment creates stronger growth expectations. Stronger growth keeps inflation risks alive. Persistent inflation keeps pressure on bond yields. Higher yields tighten financial conditions,” Stephen Innes, a managing partner at SPI Asset Management, said.
“The chain reaction becomes particularly painful when investors are crowded into long-duration growth assets priced for perfection.”