Caution warranted over tech threat, investors’ AI exuberance
Hong Kong and mainland China have the expertise to prepare for an AI market downturn and the security threat of quantum computers
Stock indexes have repeatedly hit new highs despite the ebbs and flows of the AI trade. In China, tech stocks have driven a bull run but consumer stocks lag behind. The Star Market 50 Index, a technology-focused board, jumped more than 50 per cent this year. In contrast, the CSI 300 Index, the benchmark that tracks the largest listed firms on the Shanghai and Shenzhen exchanges, is about 10 per cent below its peak from 2021.
Yue is right to caution against investors’ obsession with AI. After all, when an investment bubble bursts, panic inevitably sets in. With external threats such as geopolitical tensions and global inflation compounding existing market risks, the road ahead could become very scary. After all, the current valuations of many tech and AI stocks in China and the United States – the two countries competing for tech dominance – are based more on faith than actual profits.
Yue said local banks must prepare adequate capital buffers to protect against a potential AI market downturn. Fortunately, the city’s banking system has always maintained a resilient financial cushion to absorb macroeconomic shocks.
Meanwhile, AI and quantum computers have become so powerful that, if they fall into the wrong hands, they could pose a serious threat to financial systems and their data protection.
This will be a steep learning curve. The most experienced bankers, regulators, security experts and tech executives must work together to pre-empt such threats. Fortunately, Hong Kong and mainland China do not lack such professionals. It’s a matter of getting the best people together to advance and safeguard the new tech.