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Asian Stocks Retreat as China Rally Fades, Hong Kong Hit by Tech Selloff

Asian stocks experienced a slight decline on Tuesday as the stimulus-driven rally in Chinese markets lost momentum, and concerns over prolonged high interest rates dampened investor sentiment.

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Hong Kong’s Hang Seng Index Hit Hard

Hong Kong’s Hang Seng index suffered the most significant decline of the day, falling sharply due to a selloff in electric vehicle (EV) and technology stocks. The broader regional technology sector also faltered as investors grew cautious ahead of the eagerly awaited earnings report from NVIDIA Corporation, set to be released on Wednesday.

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Wall Street Influences and Regional Impact

Wall Street’s mixed performance on Monday provided limited guidance for Asian markets. While the NASDAQ Composite reached record highs thanks to strong tech performances, other sectors lagged amid ongoing uncertainty regarding interest rates. U.S. stock index futures also edged lower during Asian trading.

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Chinese Market Rally Pauses, Awaiting Further Stimulus

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes dropped 0.3% and 0.4%, respectively, pulling back from their highest levels of 2024. This decline followed a period of significant gains over the past two months. Investors engaged in profit-taking while awaiting additional details on Beijing’s upcoming stimulus measures and their potential impact on the economy. Analysts suggest that the success of these measures, particularly those targeting the struggling property market, will be crucial for economic recovery.

Hong Kong Suffers from EV and Tech Stock Losses

Hong Kong’s Hang Seng index declined by as much as 2% from a nine-month high, largely driven by a nearly 20% drop in shares of Li Auto Inc. after the EV maker reported disappointing first-quarter earnings. This decline affected other EV stocks, with BYD Co Ltd and Geely Automobile Holdings Ltd both falling over 3%.

Major tech stocks in Hong Kong also faced individual challenges. Tencent Holdings Ltd saw a 3% drop after its much-anticipated Dungeon & Fighter mobile game was taken offline shortly after its launch. Alibaba Group Holding Ltd fell 1% following further price cuts in its cloud unit, specifically targeting the Tongyi Qianwen AI bot. Baidu Inc. also declined by 3%, in line with its peers.

Mixed Performance Across Broader Asian Markets

Broader Asian markets traded within a flat-to-low range as investors awaited further clues on U.S. interest rates this week. Japan’s Nikkei 225 inched up 0.2%, while the broader TOPIX index rose 0.1%. In contrast, Australia’s ASX 200 fell 0.3% after the Reserve Bank of Australia’s May meeting minutes revealed that the bank had considered raising interest rates to combat persistent inflation. South Korea’s KOSPI declined by 0.5%, while futures for India’s Nifty 50 index indicated a slightly positive open.

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