July 8 (Reuters) – HSBC closed its “overweight” stance on emerging markets equities on Wednesday, citing increased volatility in Asia and warning that renewed concerns over weaker AI spending could disproportionately weigh on EM Asian markets.
EM Asian equities have remained volatile lately, with major technology stocks coming under pressure as investors grow increasingly cautious about debt-backed AI spending and the sustainability of returns from those investments.
The broader MSCI’s index tracking EM Asian equities slid over 2% on Wednesday, broadly driven by South Korean equities, while a flare-up in Middle East tensions also weighed.
South Korea’s benchmark KOSPI stock index closed 5.35% lower on the day, dropping more than 20% from a record close in late June and signalling the market is in bear territory.
The latest bout of jitters came on Tuesday, when investors sold Samsung Electronics despite the company forecasting a 19-fold jump in second-quarter operating profit, amid concerns over the durability of the AI-driven boom.
“At least for the next few weeks, the narrative of AI over-spending and any signs of AI capex being cut can hurt semi stocks and therefore disproportionately affect EM equities,” said strategists at HSBC, as they dropped their bullish view on the asset class.
Meanwhile, HSBC upgraded eurozone equities to “overweight”, saying lower consensus growth expectations and a weaker euro should support the region’s stocks over the summer months.
(Reporting by Joel Jose in Bengaluru; Editing by Shilpi Majumdar and Vijay Kishore)
