Asia Equities Slip as Pressure from China’s AI Woes and Weak US Futures Spill Over
SINGAPORE (Reuters) – Asian equities fell on Friday, tracking weakness in US futures and pressured by growing concerns over the impact of China’s worsening tech sector crisis on the region’s markets.
The dollar firm as investors sought refuge in safe-haven assets amid the escalating tensions.
MSCI’s Asia-Pacific ex-Japan index, which tracks the region’s equities, shed 0.4% in early trade, led by losses in Hong Kong and South Korea. The benchmark index has lost about 2.5% so far this week, amid a broader rout in global equities.
Chinese technology stocks continued to slump, with the Shenzhen Component Index down 1.3% and the CSI 300 Index sliding 1.1%. The losses followed a report from Chinese state-run media that said Beijing was mulling a probe into the sector, citing "national security risks" and "irrational speculation".
The moves came as US futures signaled a weaker start to the trading day, with Dow Jones Industrial Average futures dropping 0.4% and S&P 500 futures sliding 0.5%. This follows a steep sell-off in global equities earlier in the week, fueled by concerns over rising inflation and interest rates.
"China’s tech sector crisis is having a spill-over effect on the broader region, as investors become increasingly nervous about the impact on growth and earnings," said Emily Wang, a market analyst at IG Markets.
"The uncertainty is likely to continue until the Chinese authorities provide clearer guidance on the probe and any potential measures to support the sector."
The dollar, meanwhile, firm against its peers, rising 0.2% against a basket of currencies as investors sought refuge in safe-haven assets. The yen and the Swiss franc, two traditional safe-haven currencies, also gained ground.
"The market is still grappling with the fallout from China’s tech sector crisis, and investors are increasingly seeking safe-haven assets amid the uncertainty," said Jane Foley, a currency strategist at Rabobank.
"In the absence of any major developments, we expect the dollar to continue firming, driven by its safe-haven status and the relatively high yields offered by US bonds."
In currency markets, the Chinese yuan also fell against the dollar, down 0.3% to 6.88 per dollar. The Singapore dollar and the Korean won were among the biggest decliners, shedding 0.5% and 0.4%, respectively.
Asian shares were led lower by losses in Hong Kong’s Hang Seng Index, which fell 1.2%, and the Kospi in South Korea, which dropped 1.1%. The Shanghai Composite Index also declined 0.5%, weighed down by weakness in financial and energy stocks.
In commodity markets, oil prices edged higher, with Brent crude rising 0.3% to $73.65 per barrel. Gold prices were little changed, holding steady at $1,330.90 per ounce.
Overall, the mood in global markets remained cautious, with investors remaining wary of the escalating tensions in China’s tech sector and the potential implications for the region’s growth outlook.
