Hong Kong stocks pare losses 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 dropped 1.2 per cent lower to 24,657.06 at the close, paring a loss of as much as 2 per cent after a rebound in US index futures. The Hang Seng Tech Index lost 2.7 per cent. The mainland’s CSI 300 Index slid 2.1 per cent, while the Nasdaq-styled Star Market 50 Index retreated 4.3 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 8.3 per cent, with the exit of leveraged trading magnifying sell-offs to trigger a 20-minute trading halt. Taiwan’s Taiex sank 3.5 per cent and Japan’s Nikkei 225 shed 3.9 per cent.
The narrative, which has shifted to rate increases from monetary easing, is unsettling the AI trade in Asia, where South Korea and Taiwan are closely intertwined with the supply chain of the cutting-edge technology and mainland China prioritises technological innovation in economic growth while pushing AI adoption.
“Markets are adopting a more cautious tone, but this is not a full-blown panic,” said Charu Chanana, chief investment strategist at Saxo. “What we are seeing instead is a recalibration as investors digest several pressures simultaneously after a strong run, crowded positioning in the AI trade, an increasingly top-heavy market, questions around how the next phase of AI investment will be financed following recent developments, and a repricing of Fed expectations after firmer US data.”
US employers added 172,000 jobs in May, more than any of the forecasts by economists, while the unemployment rate stayed steady at 4.3 per cent.