Hong Kong’s Exchange Fund earnings tumble 74% as HKMA warns of more market turbulence

China and Hong Kong stocks plunged on Friday amid a tech market rout led by the Nasdaq, heightening concerns that the AI boom may be losing momentum. China's blue-chip CSI300 Index slipped 1.5% by midday but was set to end a 12-week decline streak. The Shanghai Composite Index dropped 1.1%. The tech-focused Star 50 Index and AI Index each fell as much as 5% before recovering some ground.

In Hong Kong, the Hang Seng Index fell 1%, while the Hang Seng Artificial Intelligence Index plummeted 4%. The Nasdaq's sharpest one-day decline since April 2025, wiping trillions of dollars off market value, sent global risk aversion soaring, with South Korea's KOSPI down more than 8% and Japan's Nikkei falling 5%. Dong Baozhen, chairman of asset manager Lingtong Shengtai, noted that the US stock market, the backbone of the global AI bull run, had lost its strength.

Chinese AI hardware stocks heavily dependent on the US market suffered the most, with Zhongji Innolight and Eoptolink Technology both down 7-8%. AI software firms, including Zhipu, faced pressure, with Zhipu sinking as much as 15.4% due to worries about a potential AI backlash affecting Anthropic's IPO. Jason Hsu, founder of Rayliant Global Advisors, emphasized that China's sentiment-driven market was heavily influenced by US AI stock performance.

Technology stocks hold significant weight in China's market, and any signs of a US AI bubble bursting could impact China's market. Despite early panic selling, bargain hunters helped mitigate losses, and the market remained on track for weekly gains after Beijing's support measures and commitment to preventing systemic risks. Pepperstone strategist Dilin Wu warned that China might still feel the impact of Wall Street's sell-off, especially with selling intensity, but cautioned against treating China's AI supply chain as a single trade.

Growth in AI chip players like Huawei and Cambricon primarily stems from China's self-reliance drive in technology.