Global Financial Connection | Asia-Pacific Stock Markets Close Lower on the 9th:

Major Asia-Pacific stock indexes closed broadly lower

Following last week's MSCI Asia Pacific Index which fell by 2.2% at one point, marking the largest intraday drop since the panic selling on August 5, Asia-Pacific stock markets opened broadly lower on September 9th. The Nikkei 225 Index fell by over 1,000 points at one point, and the South Korean Composite Index approached a 2% drop during the session. India's SENSEX 30, Indonesia's Composite Index, MSCI Vietnam, and Australia's S&P 200 all opened lower. By the close, the overall decline in Asia-Pacific stock markets had somewhat narrowed.

What factors are affecting the opening decline across Asia-Pacific stock markets? Will the contagion effect of the US stock market further expand, and will a global stock market crash recur? Let's listen to the analysis by Jiang Han, a senior researcher at Pangoal Research Institute.

Global factors impact Asia-Pacific stock markets

Jiang Han: The uncertainty of the global economic recovery outlook is an important reason for the stock market decline. Factors such as the continuous impact of economic downward pressure on global economic activity, rising inflationary pressures, and adjustments in central bank policies have increased market uncertainty, making investors' expectations for future economic growth more pessimistic.

At the same time, the tension in international political situations may also have had a certain impact on the Asia-Pacific stock markets. Current geopolitical conflicts, trade disputes, and other uncertainties could trigger market panic, which is one of the most serious issues for the current Asia-Pacific stock markets.

A global stock market crash is not an easy feat

Jiang Han: In the long term, firstly, the US stock market, as a barometer for global stock markets, does indeed have a certain contagion effect on other markets. However, the magnitude of this effect depends on a variety of factors, so it cannot be simply assumed that a decline in the US stock market will necessarily lead to a global stock market crash.

Secondly, although the global economy faces many challenges and uncertainties, governments and central banks around the world are also actively taking measures to respond. These measures have been somewhat effective so far and can alleviate market panic to a certain extent, reducing the risk of a stock market crash.

From historical experience, a global stock market crash is not an easy feat. The trend of the stock market is influenced by a variety of factors, including fundamentals, technicals, and market sentiment. Against the backdrop of the global economy having some downward pressure but still gradually recovering, although the market faces many challenges and uncertainties, investors should maintain a rational and cautious attitude, avoiding blind following or excessive panic.Overseas Investors Withdraw from Asian Tech Stocks

Recently, the withdrawal of overseas investors from Asian tech stocks has garnered attention. On September 9th, Japanese chip stocks continued the significant downward trend from the previous week, with Tokyo Electron closing down 7.31% and Renesas Electronics closing down 6.77%.

Why are overseas investors pulling out of Asian tech stocks? The recent massive market value evaporation of NVIDIA, nearly $279 billion, has dealt a heavy blow to the Asian tech stock market. Is there a chance for Asian tech stocks to rebound in the short term? What will it depend on? Let's connect with Yang Delong, the Chief Economist at Qianhai Open Source Fund.

The plunge in U.S. tech stocks affects Asian tech stocks

Yang Delong: Recently, there has been a large exodus of foreign capital from the tech stocks in the Asia-Pacific market, a phenomenon closely related to the recent decline in U.S. tech stocks.

The rise of this bull market has been mainly driven by the strong increase in U.S. tech stocks, especially the significant growth of the AI sector represented by NVIDIA, which has brought about a bull market in tech stocks.

However, the U.S. tech stock market has experienced several significant downturns. Recently, NVIDIA has once again seen a sharp decline, with its market value evaporating by over $200 billion, intensifying the decline in tech stocks. This has also become an important signal that the U.S. stock market may have peaked.

In the second quarter, "Oracle of Omaha" Warren Buffett's Berkshire Hathaway significantly reduced its largest position, "Apple," by half, and the total reduction in the U.S. stock market reached about $90 billion. This indicates that Buffett believes the U.S. stock market has already shown signs of peaking risks, and thus began to reduce holdings on a large scale before the market peaked. This is also a signal that tech stocks may experience a regional decline.

Most tech stocks in the Asia-Pacific market have followed the rise of U.S. tech stocks. Therefore, after the sharp decline in U.S. tech stocks, some funds have chosen to withdraw from the Asia-Pacific tech stocks, leading to this round of decline.

It is difficult for tech stocks to regain their upward momentum in the short term.Yang Delong: In the short term, it seems quite difficult for technology stocks to regain their upward momentum. Only after more applications are implemented or performance gradually releases can technology stocks possibly usher in a new round of rising trends.

At present, the valuation of the AI sector in the United States is relatively high. Although the market is full of optimistic expectations for its future, these expectations have not yet been transformed into actual applications and performance. Therefore, technology stocks still face significant challenges if they want to regain their strength in the short term. Investors should be aware of the risks involved and avoid blindly chasing highs or hastily bottom-fishing during pullbacks, and should maintain a certain level of patience.

Currently, we are still in the wave of the fourth technological revolution, and high-quality technology companies are still worth paying attention to, but the risks brought about by overvaluation cannot be ignored.

Hong Kong stocks open low and fall further

Amid the turbulence in the Asia-Pacific stock market, Hong Kong stocks opened low and fell further on September 9th. By the end of the day, the Hang Seng Index fell by 1.42%, closing at 17,196.96 points, and the Hang Seng Technology Index fell by 1.46%, closing at 3,436.75 points. How to comment on today's Hong Kong stock market? Under the expectation of a rate cut by the Federal Reserve in September, what changes have occurred in the trading logic of Hong Kong stocks? Zhan Jun Yan, a strategist at Zhongtai International, shares his views with us.

Hong Kong stock decline is more influenced by internal factors

Zhan Jun Yan: Recently, the volatility of overseas stock markets has intensified, and today's Hong Kong stocks also showed turbulence, with a low opening and a further decline, closing with a significant drop. This trend is influenced by both internal and external factors, and in the short term, Hong Kong stocks mainly follow the decline of overseas stock markets.

Today, the decline of Hong Kong stocks and A-shares is higher than that of overseas stock markets. For the time being, internal factors have a greater influence.

Last week, the official manufacturing purchasing managers' index (PMI) released in China has been below the boom-or-bust line for four consecutive months, indicating weak momentum in the manufacturing industry. In addition, the inflation data released today also shows a low core CPI, reflecting insufficient domestic consumer demand. At the same time, the decline in the producer price index (PPI) for upstream industries exceeded expectations, indicating that companies are facing weak downstream demand and inventory pressure, which may affect the recovery momentum of future profits.

The medical and technology sectors have stronger resistance to declines.Yan Zhaojun: Today's Hong Kong stock data shows that the cyclical industry sectors experienced significant declines, with energy, raw materials, copper ore raw materials, oil, and coal stocks seeing substantial drops. The industrial sector also saw notable declines, while healthcare and technology stocks suffered relatively smaller losses.

Given that sectors that are highly sensitive to the economy may face pressure on profit margins, there is potential for investor selling pressure. The healthcare and technology sectors, however, generally benefit from expectations of interest rate cuts by the Federal Reserve. As liquidity abroad gradually becomes more relaxed, the valuation pressure on these sectors is somewhat alleviated, especially for healthcare and technology sectors with high beta coefficients. Moreover, as performance is gradually disclosed, profit forecasts for healthcare and technology sectors are continuously revised upwards, and their valuations are at historical lows, thus these sectors have recently shown strong resistance to declines.

Hong Kong stocks may perform well before the Federal Reserve's interest rate cut.

Yan Zhaojun: The Federal Reserve's interest rate cut in September is essentially a foregone conclusion. The current market focus is on whether the cut will be by 25 basis points or 50 basis points. According to historical experience, Hong Kong stocks typically perform well in the month leading up to a Federal Reserve rate cut, while performance in the month following the cut, as well as in the 3 to 6 months after, shows some divergence.

Looking at the historical impact of Federal Reserve rate cuts, Hong Kong stocks have on average performed well in the month prior to a cut, with most broad market and sector indices recording positive returns. Among them, the consumer staples, raw materials, real estate, and healthcare sectors have performed well. In the month following the rate cut, as well as in the 3 and 6 months after, the consumer staples, technology, and healthcare sectors have on average performed relatively better.

Considering the current profit outlook, valuation levels, and historical performance of various sectors, the technology and healthcare sectors are expected to gain momentum from the Federal Reserve's interest rate cut. Consumer staples, such as essential food and beverage, are also expected to continue to be favored by the market due to the stability of their demand. Additionally, some companies' actions to increase dividends to reward shareholders also provide certain support for related stock prices.

Overall, Hong Kong stocks have entered the observation period for economic data in the last month of the third quarter in September. The market will also closely monitor whether the People's Bank of China will have more room to follow with an interest rate cut after the Federal Reserve's rate cut. There is also anticipation for policies to continue to be effective in areas such as consumer goods replacement or real estate restrictions.

At present, Hong Kong stocks are still relatively cheap, with a forecasted P/E ratio of only 8.1 times, and the risk premium is at the 90th percentile since last year. In the short term, the Hang Seng Index may fluctuate within the range of 17,000 to 18,000 points. Investors can pay attention to sectors in the technology sector with higher technological attributes; consumer staples and healthcare sectors are also worth attention.