South Korea’s Sell-Off Goes Regional
6 Min. Read Time
Key News
Asian equities gave up morning gains as South Korea's afternoon sell-off sent regional peers lower amid continued tensions in the Middle East and a weaker US dollar.
The Hang Seng and Hang Seng Tech indices went from an intra-day high of +0.9% and +1.1% to a close of -0.39% and -1.08%, while the Shanghai went from +0.68% to +0.02%, Shenzhen went from +0.87% to +0.05%, and Science and Technology (STAR) went from +1.16% to -0.4%. Hong Kong large caps such as Alibaba (-2.18%), Tencent (-1.19%), and Xiaomi (-2.21%) took the brunt of the selling, though volumes were light (again). Mainland investors bought the Hong Kong dip (again), though they were net sellers of Alibaba for the second day in a row.
There was a little chatter in China about the Cyberspace Administration of China (CAC) implementing the second phase of "Clean Up the Internet: Rectifying the Chaos in AI Applications" campaign. The effort is focused on "Using AI to 'modify' classic works and generate 'digital garbage' And AI-generated and disseminated false information." There has been a wider effort on cross-border data security, though at this juncture, it doesn't seem to be a concern.
Trip.com fell by -5.41% on an analyst downgrade despite chatter in mainland China about strong summer travel. Kuaishou fell by -2.62% after being removed from the FTSE China index, though the company has been buying back stock, with 455,000 shares bought today. Minimax gained +3.62% and bucked the trend, with Southbound buying, alongside non-ferrous metals, real estate, and healthcare. Banks in Hong Kong and Mainland China fell, though insurance was up. CXMT gained +2.26% despite weakness in semis, semiconductor manufacturing, tech hardware, electronic equipment, and communications equipment.
Below are news items that clearly did not affect today's market action.
The "private" August Services PMI, as S&P conducts the survey, is 51.4, versus July's 50.4 and expectations of 50.6. Employment improved month over month (MoM) to 51 from 50.8. This is the 44th straight month the services PMI has been above the 50 level, indicating MoM expansion in activity.
Overnight, it was reported that 2.397 million new brokerage accounts were opened in August, which is down -10% MoM from July's 2.65 million. 25.214 million new accounts have been opened year-to-date (YTD), which is up +46% year-over-year (YoY). For perspective, according to Google search, Schwab has 38.5 million brokerage accounts, and Fidelity has 57 million.
The National Development and Reform Commission's Emerging PMI Industries index was flat in August at 47.8, down from April's 57.4. The China Federation of Logistics' High-tech Manufacturing PMI declined in August to 52.9 MoM from July's 53.3.
Chatter that Moonshot AI, also known as Kimi, has filed confidentially for a Hong Kong IPO, targeting a $50 billion valuation.
A concern with Alibaba's recent private placement has been my observation on the poor return of Hong Kong-listed companies that have issued additional shares. BYD Hong Kong shares have fallen by -23.7% since its March 2025 $5.595 billion private placement. Xiaomi's Hong Kong shares are down -47% since its $5.479 billion private placement also in March 2025. CATL is down -10% since April 2026.
The Hong Kong market is off during this period, so we can't say the private placement is the culprit, per our narrative. However, the relentless wave of Hong Kong IPOs (i.e., supply) is occurring amid light demand, as investors are overweight AI plays in the US, Korea, Taiwan, and Japan. Great business for traders and bankers, but not so great for stewards of long-term capital. Global investors have clearly voted with their feet. I wish somebody in Hong Kong would take notice! I'll get off my soapbox.
Last Night's Performance
| Country / Index | Ticker | 1-Day Change |
|---|---|---|
| China (Hong Kong) | HSI Index | -0.4% |
| Hang Seng Tech | HSTECH Index | -1.1% |
| Hong Kong Turnover | HKTurn Index | -8% |
| Hong Kong Short Sale Turnover | HKSST Index | -11.1% |
| Short Turnover as a % of Hong Kong Turnover | N/A | 0.2 |
| Southbound Stock Connect Net Buy/Sell (US $ Millions) | N/A | 433.62 |
| China (Shanghai) | SHCOMP Index | 0% |
| China (Shenzhen) | SZCOMP Index | 0.1% |
| China (STAR Board) | Star50 Index | -0.4% |
| Mainland Turnover | .chturn Index | -1.6% |
| Japan | NKY Index | -0.2% |
| India | SENSEX Index | -0.5% |
| Indonesia | JCI Index | 1.1% |
| Malaysia | FBMKLCI Index | 0.4% |
| Pakistan | KSE100 Index | 0.1% |
| Philippines | PCOMP Index | 0.3% |
| South Korea | KOSPI Index | 0.3% |
| Taiwan | TWSE Index | -0.7% |
| Thailand | SET Index | 0.1% |
| Singapore | STI Index | 0.1% |
| Australia | AS51 Index | 0.5% |
| Vietnam | VNINDEX Index | -0.0005 |
| Indicator | Hong Kong | Mainland China |
|---|---|---|
| Today's Volume % of 1-Year Average | 73 | 73 |
| Advancing Stocks | 280 | 2142 |
| Declining Stocks | 238 | 2867 |
| Outperforming Factors | EPS Revision, Momentum, Liquidity | EPS Revision, Value, ESG Score |
| Underperforming Factors | Low Volatility | Low Volatility, Large Caps, Liquidity |
| Top Sectors | Materials, Healthcare, Real Estate | Real Estate, Energy, Discretionary |
| Bottom Sectors | Discretionary, Communication, Tech | Tech, Staples, Utilities |
| Top Subsectors | Non Ferrous Metal, Financial Services/Insurance, Transportation | Real Estate, Energy, Discretionary |
| Bottom Subsectors | Coal, Paper/Packaging, Consumer Discretionary Distribution | Tech, Staples, Utilities |
| Southbound Connect Buys | HS Tech ETF, Minimax, YOFC (Moderate), Tencent, Xiaomi, Z AI (Small) | Marine, Insurance, Precious Metals |
| Southbound Connect Sells | Alibaba (Large), KB Laminates, SMIC (Small) | Agriculture, Paper, Cultural Media |
| MSCI China All Shares Index | # of Stocks | Average 1-Day Change (%) |
|---|---|---|
| Hong Kong Listed | 165 | -0.61 |
| Communication Services | 11 | -1.26 |
| Consumer Discretionary | 28 | -1.58 |
| Consumer Staples | 13 | -0.66 |
| Energy | 6 | -0.91 |
| Financials | 25 | -0.34 |
| Health Care | 16 | 1.79 |
| Industrials | 22 | 0.46 |
| Information Technology | 12 | -1.08 |
| Materials | 14 | 2.48 |
| Real Estate | 7 | 1.78 |
| Utilities | 11 | 0.22 |
| Mainland China Listed | 386 | 0.16 |
| Communication Services | 8 | 0.69 |
| Consumer Discretionary | 26 | 0.94 |
| Consumer Staples | 19 | -0.26 |
| Energy | 12 | 1.02 |
| Financials | 64 | 0.14 |
| Health Care | 31 | 0.69 |
| Industrials | 58 | 0.37 |
| Information Technology | 95 | -0.34 |
| Materials | 52 | 0.8 |
| US & Hong Kong Dually Listed | Ticker | 1-Day Change (%) |
|---|---|---|
| Tencent HK | 700 HK Equity | -1.2 |
| Alibaba HK | 9988 HK Equity | -2.2 |
| JD.com HK | 9618 HK Equity | -1.6 |
| NetEase HK | 9999 HK Equity | -2 |
| Yum China HK | 9987 HK Equity | -2.2 |
| Baozun HK | 9991 HK Equity | 5.9 |
| Baidu HK | 9888 HK Equity | -0.9 |
| Autohome HK | 2518 HK Equity | 0.8 |
| Bilibili HK | 9626 HK Equity | -1.6 |
| Trip.com HK | 9961 HK Equity | -5.4 |
| EDU HK | 9901 HK Equity | -2.2 |
| Xpeng HK | 9868 HK Equity | -1.4 |
| Weibo HK | 9898 HK Equity | -0.6 |
| Li Auto HK | 2015 HK Equity | 1.1 |
| Nio Auto HK | 9866 HK Equity | -1.1 |
| Zhihu HK | 2390 HK Equity | -3.4 |
| KE HK | 2423 HK Equity | -0.5 |
| Tencent Music Entertainment HK | 1698 HK Equity | -0.7 |
| Meituan HK | 3690 HK Equity | -1.4 |
| Hong Kong's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ALIBABA GROUP HOLDING LTD | -2.2 |
| TENCENT HOLDINGS LTD | -1.2 |
| MINIMAX GROUP INC | 1.7 |
| YANGTZE OPTICAL FIBRE AND-H | 3.2 |
| PING AN INSURANCE GROUP CO-H | 2.7 |
| KINGBOARD LAMINATES HLDG LTD | 3.3 |
| Z AI CO LTD | -5.3 |
| XIAOMI CORP-CLASS B | 1.8 |
| LENOVO GROUP LTD | -0.2 |
| MEITUAN-CLASS B | -1.4 |
| Shanghai and Shenzhen's Most Heavily Traded by Value | 1-Day Change (%) |
|---|---|
| ZHONGJI INNOLIGHT CO LTD-A | -4.3 |
| CXMT CORP-A | -3.9 |
| EOPTOLINK TECHNOLOGY INC L-A | -4 |
| IEIT SYSTEMS CO LTD-A | 0.8 |
| CONTEMPORARY AMPEREX TECHN-A | -2.7 |
| GIGADEVICE SEMICONDUCTO-CL A | -1.5 |
| SHENGYI TECHNOLOGY CO LTD -A | 0.4 |
| CHINA JUSHI CO LTD -A | 2.6 |
| HENGTONG OPTIC-ELECTRIC CO-A | -0.7 |
| SUZHOU DONGSHAN PRECISION-A | -2.3 |
Last Night's Exchange Rates, Prices, & Yields
- CNY per USD 6.72 versus 6.72 yesterday
- CNY per EUR 7.79 versus 7.77 yesterday
- Yield on 10-Year Government Bond 1.68% versus 1.69% yesterday
- Yield on 10-Year China Development Bank Bond 1.76% versus 1.76% yesterday
- Copper Price +0.40%
- Steel Price -0.67%
