Asia-Pacific Stocks Retreat as China Data Disappoints and AI Optimism Cools

Summary:

Asian markets slumped on Monday, led by steep losses in South Korea, as investors digested weaker-than-expected Chinese economic data and a global pullback from AI-driven stocks....

South Korea Leads Regional Declines Amid Global Caution

Asian equities opened the week under pressure, mirroring Wall Street’s Friday retreat and reflecting growing investor caution around AI stocks and underwhelming economic indicators from China. South Korea’s KOSPI took the heaviest hit, tumbling 2.16% as semiconductor giants like SK Hynix and Samsung Electronics saw sharp sell-offs, dropping over 4% and 3.3% respectively. The tech-heavy Kosdaq also declined by 1.17%.

This move echoes broader global risk-off sentiment, with portfolio managers citing fatigue in the AI rally and a general sense of nervousness heading into year-end positioning. Jed Ellerbroek of Argent Capital Management summed it up: “Investors are definitely skittish as it relates to AI not outright pessimistic, but just cautious and hesitant.”

Chinese Data Underdelivers, Pressuring Regional Sentiment

Markets were particularly sensitive to China’s latest economic releases for November. Retail sales rose just 1.3% year-over-year, significantly missing the 2.8% growth forecast and marking a notable slowdown from October’s 2.9% pace. Fixed asset investment and industrial production figures also fell short of expectations, with the latter rising only 4.8%, down from 4.9% previously.

These readings dampen optimism about a near-term rebound in Chinese domestic demand. As China remains a key trading partner and growth driver for the region, any weakness there reverberates across Asia, particularly in export-dependent economies like South Korea, Japan, and Australia.

Japan's Tankan Survey Offers a Glimmer

Contrasting China’s sluggishness, Japan’s latest Tankan survey brought a rare positive surprise. The business sentiment index for large manufacturers rose to +15 in the fourth quarter its highest level in four years meeting economist expectations and suggesting resilience in Japan’s industrial base. The non-manufacturing index also showed strength at +34, reinforcing signs of recovery in the service sector.

However, Japan’s stock markets didn’t escape the regional downturn. The Nikkei 225 dropped 1.3% and the broader Topix fell 0.27%, dragged lower by global cues and profit-taking.

Broader Regional Moves and Australian Tragedy

Across other markets, Australia’s S&P/ASX 200 lost 0.66%, with sentiment further dampened by tragic domestic news its deadliest mass shooting in three decades, which left at least 15 dead. In Hong Kong, the Hang Seng index slipped 0.79%, while the mainland’s Shanghai Composite edged down 0.12%, with the CSI 300 remaining flat amid mixed investor reactions to China’s data dump.

India’s Nifty 50 remained unchanged, while Taiwan and Southeast Asian markets showed modest movements ahead of regional central bank decisions later this week.

Wall Street’s AI Reversal Sets the Tone

The regional mood was further darkened by Friday’s U.S. session, where major indices pulled back sharply from recent highs. The S&P 500 slid 1.07%, while the Nasdaq tumbled 1.69%, weighed down by sharp losses in AI-related stocks. Broadcom plunged over 11% after its earnings report failed to match lofty investor expectations. AMD, Palantir Technologies, and Micron also saw declines, raising concerns about an overextended AI trade.

This global reset in tech optimism is feeding into Asia, where semiconductor stocks and AI-adjacent sectors are crucial market drivers.

Outlook: Volatility Ahead

As the year winds down, investors remain highly sensitive to macro signals, with China’s faltering recovery and AI trade fatigue clouding near-term visibility. Unless China unveils more aggressive policy support or global tech sentiment stabilizes, Asia-Pacific markets could continue facing downward pressure.

Market watchers now look to upcoming central bank meetings and U.S. data releases to assess whether the recent correction is a pause or the start of a broader risk-off shift.

Source: CNBC

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