Hong Kong sinks 4.5% and the Nikkei 4% as the AI scare hits Asia, while China's slide deepens

Wall Street's worries about the cost of artificial intelligence travelled east this week. After Meta's spending bill set off a chip-stock sell-off in New York on Thursday, Asian markets took the hit. Hong Kong had its worst week of October, and Tokyo fell to its lowest level since late July.

Europe slipped too, and in China a long slide got longer. Yesterday we covered the week on Wall Street. Here is the rest of the world, and what it means for India.

The week in Asia and Europe

• Hong KongThe Hang Seng fell 1,093.46 points, or 4.52%, to 23,093.37 in a four-day week. The Hang Seng Tech index lost 5.76%. On Thursday alone the Hang Seng dropped 3.03%, its weakest close since March.
• JapanThe Nikkei 225 lost about 4% to close at 62,693.16. September core inflation in Japan ran above the Bank of Japan's 2% target, raising talk of higher rates.
• South KoreaThe Kospi fell more than 2% for the week, MoneyToday reported. On Friday it dropped over 4% during the day, then recovered to close up 0.3% at 5,550.30 as SK hynix rebounded. Foreign investors still sold a net 992.8 billion won of Korean shares that day.
• TaiwanIts market was shut on Friday because of Typhoon Champi.
• EuropeThe STOXX Europe 600 lost about 1.4%, its steepest weekly fall since early September. Germany's DAX fell 1.7% to 25,181.65 and London's FTSE 100 fell 1.8% to 10,690.36. Higher oil, weak French business surveys and political unrest in France added to the gloom.

China: a bear market in blue chips

The Shanghai Composite fell 0.69% for the week to 3,690.48. The CSI 300, which tracks China's 300 biggest listed companies, fell 1.6%. That was its 11th straight weekly fall, the longest losing streak since it was launched in 2005, Reuters reported. On Thursday it closed 20.2% below its June peak, which puts it in a bear market.

Friday brought a rebound. Shares fell early, then trading jumped in exchange-traded funds favoured by state-backed investors, known as the "National Team". That fuelled talk of official support, though none was confirmed.

The gap with America is now historic. The ratio of the S&P 500 to the Shanghai Composite hit a record on 22 October in data going back to 1997, 24/7 Wall St. calculated. In Hong Kong, investors were also rattled by Beijing's tax drive on offshore investment gains.

China's economy: strong factories, weak shoppers

China's economy grew 4.5% in July–September from a year earlier, up from 4.3% in the previous quarter and above the 4.4% economists expected. Beijing's target for 2026 is 4.5% to 5%.

That headline number had an awkward side effect for investors. Because growth is close to target, hopes faded that Beijing would roll out a big new stimulus. Analysts at RBC Wealth Management said policymakers have chosen small, step-by-step measures rather than large packages like those in 2024. For more on how China's export strength affects India, read China's trade surplus and India.

Oil up, gold down

Brent crude settled at $116.72 a barrel on Friday, up 3.14% on the day, as tension in the Gulf continued. Gold fell about 1.3% on Friday to around $4,008 an ounce, and the Japanese yen strengthened as investors looked for safety.

Why it matters for India

• OilIndia imports most of its crude, so oil above $116 raises the import bill and adds to inflation. See what $100 oil does to India.
• Foreign moneyForeign investors have pulled ₹48,056 crore out of Indian shares in October up to the 23rd. A chunk of global money had gone to North Asia's AI boom; a wobble there does not automatically mean it comes to India, as high US yields still pull money towards America. See how a Fed hike pulls money out of India.
• ChinaWeak Chinese demand and a strong export push can mean cheaper Chinese goods competing with Indian makers, at home and abroad.
• TechResults from Samsung and SK hynix next week will be read across Asia for clues on AI spending, including by investors in Indian IT.

What to watch next week

• Central banksThe Fed decides on 28 October (late night in India), the ECB on 29 October and the Bank of Japan on 30 October. All three are widely expected to hold rates, according to surveys and market pricing compiled by Admirals.
• Asian chip resultsSK hynix reports on 28 October and Samsung Electronics on 29 October.
• UK BudgetDue on 28 October.
• Jio PlatformsAllotment is tentatively due on 26 October and listing on 28 October. See our Jio IPO explainer.

Educational content only, not investment advice.