APAC Market Wrap - Feb 2

Chinese Stock Markets:  

At close, the Shanghai Composite Index fell 2.48%, the Shenzhen Component Index declined 2.69%, and the ChiNext Index dropped 2.46%. Sector performance: baijiu (white liquor) concepts saw repeated intraday strength, while non-ferrous metals, oil & gas, chemicals, coal, and semiconductors led declines.

 

Hong Kong Stock Market:  

Hong Kong's major indices all pulled back today. The Hang Seng Index fell 2.23% to 26,775.57; the Hang Seng Tech Index dropped 3.36% to 5,526.31; and the Hang Seng China Enterprises Index declined 2.54% to 9,080.19.

 

Market action showed gold, non-ferrous metals, building materials/cement, and semiconductors leading losses, while gaming and liquor stocks bucked the trend with gains.

 

Japanese Stock Market:  

The Nikkei 225 fell 1.25% to 52,655.18. By sector, air transport, retail, food, and shipping advanced; securities, mining, and banking declined.

 

South Korean Stock Market:  

The KOSPI Composite Index plunged 5.26% to 4,949.67. Office electronics, air cargo, and tobacco edged higher; non-ferrous metals, healthcare management, electrical equipment, and semiconductors led declines.

 

Australian Stock Market:  

The S&P/ASX 200 (XJO) dropped 1.02% to 8,778.60. Independent power producers, diversified media, and credit rose; semiconductors, metals & mining, apparel, and other energy fell.

 

Singapore Stock Market:  

The Straits Times Index (STI) declined 0.26% to 4,892.27. Forestry products, building materials, and telecom services gained; auto & parts, oil & gas, and industrial products fell.

 

Malaysian Stock Market:  

The FTSE Bursa Malaysia KLCI rose 0.58% to 1,740.88. Financial services, closed-end funds, and transportation & logistics advanced; construction, utilities, and business trusts declined.

Key Events

AI Boom Hit Hard? Kospi Plunges Over 5%, Breaches 5000 — Circuit Breaker Triggered Intraday  

 

Over the past year, South Korean stocks have often led global markets, with prices climbing even as AI enthusiasm cooled elsewhere. But Monday's (first trading day of February) violent selloff is testing investor confidence.

 

What began as a mild pullback escalated into heavy liquidation around midday local time, with Korean stocks swept into the same wave of unwinding “crowded trades” as gold and silver. Uncertainty over Fed policy and doubts about the sustainability of AI-driven spending added heavy pressure on Korean tech names.

 

Data shows the KOSPI fell as much as 5.6% intraday and closed down 274.67 points (-5.26%), the largest single-day drop since April last year. Due to the >5% decline, the Korea Exchange triggered a “Sidecar” mechanism (temporary trading halt) at 12:31 local time, suspending sell orders for five minutes to curb excessive volatility.

 

“Overbought” Signal Flashing! BofA Warns: Global Stocks Face Downside Risk — Gold Remains Core Holding  

 

Recently, Bank of America strategists noted that investor optimism has reached extreme levels. Their bull/bear indicator rose from 9.2 to 9.4 — signaling that the sell signal for risk assets continues to flash.

 

BofA attributes the surge in optimism to “strong gains in global equity indices, high all-in bullish positioning, and solid credit market technicals,” which have offset recent outflows from equity funds.

 

The team led by BofA Chief Investment Strategist Michael Hartnett pointed out that 89% of the MSCI World equity index is now trading above both its 50-day and 200-day moving averages — putting the market in BofA’s defined “overbought” zone, which typically signals elevated downside risk for equities.

 

Apple Wins Major India Tax Break: Duty-Free Equipment Supply to Contract Manufacturers for 5 Years  

 

India's government announced Sunday that foreign companies can supply machinery to contract manufacturers in certain zones duty-free for five years. This is a significant win for Apple.

 

A long-standing concern for Apple in India has been that providing expensive assembly equipment to contract manufacturers could create a “business connection” under Indian tax law, subjecting Apple to tax on the contractors' profits.

 

Under the new rules, Apple can import equipment for contract factories in Indian customs bonded zones duty-free for five years, with taxes paid only when products enter the domestic market (exempt if mainly for export).

Institutional Views

Macquarie: Dollar Stabilizes for Now but Risks Linger  

 

Macquarie strategist Thierry Wizman noted that Trump's nomination of Warsh to lead the Fed helps stabilize the dollar. Market traders may see this as a signal of continuity in central bank tradition. However, Trump is unlikely to deviate from his belief system — he has repeatedly pressured the Fed for rate cuts.

 

Warsh, a longtime friend of the Trump family, has advised the President behind the scenes on monetary policy since 2009. This suggests Warsh may act more swiftly when rate-cut timing arrives.

 

CICC: $5,500 Gold Is a Major Watershed — Warsh Is Just the Catalyst  

 

CICC's research note states that the sharp rise in gold has already come with surging volatility and massive ETF inflows, effectively pricing in a “cost.” The world's largest gold ETF, SPDR Gold Trust, has rebuilt holdings to levels near the 2022 Russia-Ukraine conflict peak, and the correlation between ETF flows and gold prices has risen to 0.98 over the past two years — a historical high — indicating sentiment is already extremely overheated.

 

Warsh's nomination merely served as the catalyst needed for the storm; otherwise, why didn't U.S. stocks, Treasuries, and the dollar see such turbulence?  

 

That said, stripping away short-term swings, gold exceeding $5,500/oz is indeed a major watershed: total gold stock value (~$38.2 trillion) now matches U.S. Treasury stock (~$38.5 trillion) for the first time since the 1980s. This signals early cracks in the post-Bretton Woods system where the global economy anchors to the dollar, and the dollar to Treasuries.