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ASIA STOCKS: China & HK Equities Drop As Tech Rally Runs Out Of Steam

ASIA STOCKS
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China and Hong Kong equities are struggling today driven by a faltering tech rally and broader economic concerns. The HSI is 1.55% lower, while the Hang Seng Tech Index fell 2.5%, with tech giants like Meituan (-6.4%), Alibaba (-3.3%), Tencent (-2.6%), Kuaishou (-8.4%), and Bilibili (-5.1%) leading the losses amid profit-taking and skepticism about the sustainability of the tech surge without stronger economic fundamentals, while Alibaba is also expected to release earnings later today.

  • The Hang Seng China Enterprises Index also declined by as much as 2.4%, its steepest drop in over two weeks, pressured by Meituan’s costly social security expansion plans for delivery workers and anticipation of earnings from Alibaba, Bilibili, and NetEase later today, however we have clawed some of those losses back to last trade down 1.50%.
  • In mainland equities, the CSI 300 Index and Shanghai Composite Index edged down 0.4% and 0.2%, respectively, reflecting cautious sentiment.
  • The tech-driven rally, which has added roughly US$280b to Hong Kong’s market value this year, fueled by DeepSeek’s AI breakthrough, is starting to showing signs of fatigue, with analysts like Goldman Sachs emphasizing the need for robust policy stimulus to address China’s macroeconomic challenges.
  • The China Securities Journal reports that investments in Chinese tech stocks are "increasingly crowded," with the tech sector comprising 46% of total market trading, nearing a historical high of 50% from April 2023. Fund managers are cautioning about valuation risks due to a "slightly overheated" trading sentiment, particularly in sub-segments like cloud computing, machine vision, and industrial software, while areas like optical fiber cable and AI chips remain less saturated, pre BBG.
  • Adding to the bearish mood, FOMC minutes were released overnight and indicated a reluctance to cut rates soon, citing inflation risks from potential US trade and immigration policies under Trump, further dampening investor confidence in the region’s markets.
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China and Hong Kong equities are struggling today driven by a faltering tech rally and broader economic concerns. The HSI is 1.55% lower, while the Hang Seng Tech Index fell 2.5%, with tech giants like Meituan (-6.4%), Alibaba (-3.3%), Tencent (-2.6%), Kuaishou (-8.4%), and Bilibili (-5.1%) leading the losses amid profit-taking and skepticism about the sustainability of the tech surge without stronger economic fundamentals, while Alibaba is also expected to release earnings later today.

  • The Hang Seng China Enterprises Index also declined by as much as 2.4%, its steepest drop in over two weeks, pressured by Meituan’s costly social security expansion plans for delivery workers and anticipation of earnings from Alibaba, Bilibili, and NetEase later today, however we have clawed some of those losses back to last trade down 1.50%.
  • In mainland equities, the CSI 300 Index and Shanghai Composite Index edged down 0.4% and 0.2%, respectively, reflecting cautious sentiment.
  • The tech-driven rally, which has added roughly US$280b to Hong Kong’s market value this year, fueled by DeepSeek’s AI breakthrough, is starting to showing signs of fatigue, with analysts like Goldman Sachs emphasizing the need for robust policy stimulus to address China’s macroeconomic challenges.
  • The China Securities Journal reports that investments in Chinese tech stocks are "increasingly crowded," with the tech sector comprising 46% of total market trading, nearing a historical high of 50% from April 2023. Fund managers are cautioning about valuation risks due to a "slightly overheated" trading sentiment, particularly in sub-segments like cloud computing, machine vision, and industrial software, while areas like optical fiber cable and AI chips remain less saturated, pre BBG.
  • Adding to the bearish mood, FOMC minutes were released overnight and indicated a reluctance to cut rates soon, citing inflation risks from potential US trade and immigration policies under Trump, further dampening investor confidence in the region’s markets.