Recalling the sharp 78% plunge back then

This week, A-share markets continued to adjust, with all major broad-based indices declining. Market style diverged: large-cap blue chips and dividend-oriented assets proved relatively resilient—Shanghai 50 and CSI 300 fell by 1.39% and 3.40%, respectively; the Shanghai Composite Index dropped 2.56%, briefly breaching the 3,700-point level midweek. Amid spillover effects from overseas tech stocks’ valuation corrections, high-beta growth and small-cap assets faced concentrated selling pressure: the ChiNext Index plunged 8.90%, and the STAR 50 Index fell 6.77%; the CSI 500 and CSI 2000 declined 6.60% and 6.40%, respectively. Year-to-date, only the STAR 50 remains in positive territory, up 1.07%. By sector, among the 31 SW Industry Classification Level-1 sectors, only food & beverage and banking posted gains—up 1.89% and 1.52%, respectively. Communications, electronics, and power equipment suffered steep losses—down 10.87%, 8.75%, and 7.42%, respectively. Banking, coal, and oil & petrochemicals—dividend-oriented assets—exhibited pronounced safe-haven attributes. Average daily trading volume across the Shanghai and Shenzhen exchanges stood at RMB 1.56 trillion, markedly lower than before. Overseas, U.S. September CPI rose 3.7% year-on-year, while PPI surged to 6.3% y/y—both exceeding expectations—prompting markets to raise odds of another Fed rate hike this year. Credit risk surrounding AI infrastructure provider CoreWeave flared significantly in bond markets: some of its bonds yielded over 15%, with implied five-year default probability surpassing 60%; its stock plunged over 25% in a single week. The Philadelphia Semiconductor Index declined for eight consecutive trading days, falling over 11% for the week. Capital rotated into defensive blue-chip names, lifting the Dow Jones Industrial Average—up 0.67% for the week—while the S&P 500 fell 1.95% and the Nasdaq Composite dropped 4.48%. In Asia, risk sentiment from overseas tech stocks rapidly spilled over into regional markets: South Korea’s KOSPI plunged 14.46% for the week, led by memory chip giants. Persistent foreign outflows, coupled with share buybacks nearing completion and weakening market support, intensified the current downturn in Korean equities. In Hong Kong, the Hang Seng Index edged down 0.1%, while the Hang Seng Tech Index fell 2.13%. In Europe, major indices posted broad gains. Relatively low tech exposure helped European equities withstand this shock. Meanwhile, after Brent crude breached USD 100 per barrel, UK and other energy- and resource-heavy indices benefited directly.

Are tech stocks plunging and the U.S. Treasury safe-haven trade making a comeback? The 10-year U.S. Treasury yield falls to a three-week low.

The AI narrative has suffered successive blows, reshaping market pricing frameworks in counterintuitive ways. Against the backdrop of hot inflation data, U.S. Treasury yields did not rise—as conventionally expected—but instead plunged in tandem with the tech selloff. On Thursday, the 10-year U.S. Treasury yield fell 10 basis points to 5.09% during Asian trading hours—hitting a three-week low. Concurrently, the MSCI Asia Pacific Index tumbled over 3%, while South Korea’s KOSPI crashed nearly 9% in a single day; Samsung Electronics and SK Hynix both plunged 11%. S&P 500 futures slid 0.4%, and Nasdaq-100 futures dropped over 1%. Risk-averse capital flooded into sovereign debt markets; the U.S. dollar weakened, and gold—after three straight days of declines—stabilized and rebounded to approximately USD 4,140 per ounce. This turmoil is not driven solely by inflation data. Rather, credit stress emanating from cloud computing firm CoreWeave—the emerging crack in the AI supply chain—is rapidly transmitting to equity markets. CoreWeave’s stock plunged over 17% on Wednesday; its USD-denominated bond maturing in 2032 surged in yield above 15%, while its five-year credit default swap (CDS) widened by 135 bps—implying a five-year default probability of 63%. According to Bloomberg, multiple analysts and investors are reassessing their overall exposure to AI-sector financing risks. AI Credit Crack: CoreWeave as the Catalyst CoreWeave’s debt crisis marks an escalation of the current AI tech selloff—from valuation concerns to outright credit risk. Its high-yield bond, issued at par just four months ago, now trades below USD 78 per USD 100 face value, with its spread exceeding 1,000 bps. D.A. Davidson analyst Gil Luria labeled CoreWeave “subprime assets in the AI space,” warning that its blended borrowing cost stands around 9%, while its asset-level return on investment hovers near just 1%. Should debt rollover fail, equity value faces potential total wipeout. “The hotter-than-expected U.S. CPI print combined with the CoreWeave bond sell-off is prompting investors to reassess financing risks across the entire AI industry,” said Jung In Yun, CEO of Fibonacci Asset Management Global. Fresh data from AI model developer Anthropic also weighed on market sentiment. According to Bloomberg, citing informed sources, Anthropic posted Q3 revenue of USD 1.68 billion—but some analysts view this figure as below expectations. “The market’s disappointment with Anthropic’s seemingly strong numbers reflects deeper concerns about the massive capital consumption required to sustain such growth,” said Hebe Chen, Senior Market Analyst at Vantage Global Prime. “Against an already tight liquidity environment, the impending IPO will only intensify these concerns.”

Asian Stocks to Slide on Tech Rout, Bonds Rally: Markets Wrap

1 day ago

Asian stocks declined tracking US tech losses and Middle East tensions, driving oil prices up. Pharma stocks dropped on disappointing vaccine trial data from Moderna and Merck, while consumer goods and defense sectors remained resilient.

bloomberg

2026-10-22

Asian Stocks to Slide on Tech Rout, Bonds Rally: Markets Wrap

Asian Stocks to Slide on Tech Rout, Bonds Rally: Markets Wrap

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