Shares reverse course after AI frenzy eases

Melody Chen

Hong Kong stocks slumped over 700 points from its four-month peak in a roller-coaster ride yesterday as investors cashed out on the recent rally driven by the artificial intelligence frenzy.

The benchmark Hang Seng Index briefly soared to 22,523 points, but quickly reversed course, ending the day down 43 points or 0.19 percent at 21,814.

Turnover of the main board reached HK$379.44 billion, the highest in four months.

The Hang Seng Tech Index once hit a three-year high but later retreated and closed at 5,235 points, down about 0.9 percent.

The Hang Seng China Enterprises Index fell 55 points, or 0.68 percent, closing at 8,002 points.

Several tech stocks that saw gains in recent days were hit by selling, with Xiaomi, Lenovo and Hua Hong Semiconductor all falling by more than 5 percent.

BYD Electronics retreated nearly 8 percent, making it the worst-performing blue-chip stock, while BYD dropped 3.69 percent.

But Alibaba's shares maintained their uptrend after its chairman confirmed that the company is in partnership with Apple to develop artificial intelligence capabilities.

The stock once jumped by more than 9 percent and closed up by 2.55 percent.

The tech sector was overbought and a short-term pullback might be more beneficial for long-term market development, said Kenny Ng Lai-yin, a securities strategist at Everbright Securities International.

Ng recommends waiting for a more noticeable drop before buying any tech stocks, as they may need a period of adjustment after the gains.

Technically, the Hang Seng Index has entered the overbought range and there may be correction risks in the short term, analysts at Bocom International said in a report before the market opened.

melody.chen@singtaonewscorp.com