Analysis: Hong Kong and Taiwan Suffer Most in Stock Sell-Off

TaiwanPlus News

Stock markets across Asia suffered steep losses on Monday, with Taiwan's Taiex falling nearly 10% and Hong Kong's Hang Seng dropping more than 13%. To learn more about why these markets saw the largest losses, TaiwanPlus spoke with financial analyst Gary Ng of Natixis, who says investor sentiment has turned sharply risk-averse in the wake of the U.S. tariff announcement.

Transcript

00:00Well, there's no sugarcoating it, Gary. It was a massacre out there today in Asia's

00:04stock markets, with every major index in the region seeing major losses, some in the double-digit

00:10percentages. What's your initial take on what you're seeing?

00:14Well, I would say that the reaction hasn't really been a very big surprise to most of

00:21the investors, but it's just the scale of the tariff has been much larger than originally

00:27expected, of which the market may have been too optimistic before. So I think this is

00:32why we do see a lot of investors turning towards the more risk-adverse approach, just trying

00:39to shield itself from tariffs. So I think this is why we see money flowing into some

00:44of the Asian currencies, such as the yen, and also buying up the U.S. Treasury as well

00:48as a safe haven.

00:49You know, two of the biggest losers in stocks today were Taiwan's TAIX, which fell nearly

00:5410%, and Hong Kong, where you are, the Hong Seng Index, lost over 13%. So why do you

01:00think that these two markets in particular were hit so hard?

01:04Well, some of the sectors are really the major victims of Trump's policy on tariff. And of

01:11course, for the case of Taiwan, it is really a tech story that Taiwan has a very high reliance

01:18on U.S. export. We are talking about around 15% of Taiwan goods exported to the U.S. every

01:24year, which is the second largest right below Vietnam in the region. And once we see all

01:31these policies being kicked in, even though we do see some exception in semiconductors,

01:37but a lot of smaller firms in Taiwan may still face this risk of the supply chain reshuffling,

01:44which there's uncertainties on whether they can export to the U.S. as usual. And if we

01:50move a bit towards Hong Kong, it is a financial story that even though the banking sector

01:56is not directly affected by tariff, but banks are very related to this macro story on economic

02:04growth. So if we do see a recession globally triggered by tariff, it's possible to see

02:09this shrinking net interest margin and also worsen asset quality in bank sector. But of

02:14course, for the case of Hong Kong, one extra point that we can see here is really this

02:18connection with China, that if there is any further escalation or retaliation happen between

02:27the U.S.-China competition, the impact will simply be much higher than some of the other

02:33regional peers, such as Singapore.

02:36Given all the panic, what do you think investors should be looking at as they try to navigate

02:40this?

02:41I think the biggest, the most important point in the next one or two weeks is really about

02:47whether the U.S. will soften its stance on tariff to negotiate with other countries,

02:55because I think if we do not really see that, it means that the U.S. is probably quite serious

03:01in using all this tariff measure to really forcefully bring back certain manufacturing

03:08capacity back to the country, even though it may make zero economic sense.

03:14So under that scenario, it's possible to see the global economic growth worsening further

03:19than what we already expect or reflected in the market.

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