The Hang Seng dropped by 1.8% when markets opened, the Tech Index fell by 3.1% and the mainland’s CSI 300 Index slipped 3.1%
Hong Kong stocks slumped alongside other markets in Asia, as rising bets on an interest-rate increase after a blowout US jobs report raised the fear of capital outflows from the region and the unwinding of the AI rallies from the Chinese mainland and South Korea.
The Hang Seng Index fell 1.8 per cent to 24,493.50 as of 9.30am local time. The Hang Seng Tech Index dropped 3.1 per cent. The mainland’s CSI 300 Index slid 1.9 per cent, while the Nasdaq-styled Star Market 50 Index retreated 4.2 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 more than 7 per cent, with the unwinding of leveraged trading amplifying sell-offs. Taiwan’s Taiex sank 4.3 per cent, and Japan’s Nikkei 225 shed nearly 4 per cent.
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Rising Treasury yields and mounting expectations about financial tightening risk compressing the valuations of the technology stocks, which have been priced to perfection and led the global markets to all-time highs this year.
The back and forth of a diplomatic path to end the Middle East tensions has also weighed on the rally, with crude oil prices remaining elevated to make inflation persistent.
“Strong employment creates stronger growth expectations. Stronger growth keeps inflation risks alive. Persistent inflation keeps pressure on bond yields. Higher yields tighten financial conditions,” Stephen Innes, a managing partner at SPI Asset Management, said.
“The chain reaction becomes particularly painful when investors are crowded into long-duration growth assets priced for perfection.”
US employers added more jobs in May than any of the forecasts by economists, with the unemployment rate staying at 4.3 per cent.
The strong reading immediately fuelled an increase in Treasury yields across curves, as rates traders priced in rate-hikes by the Federal Reserve. The US central bank is set to meet from June 16 to 17 under the leadership of new Chairman Kevin Warsh.
In the Middle East, Iran fired several rounds of missiles towards Israel, a sign that Washington and Tehran have made little progress towards a tentative deal to end the war that started in late February.
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This article originally appeared on the South China Morning Post (www.scmp.com), the leading news media reporting on China and Asia.
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