BENGALURU (July 8): HSBC closed its 'overweight' stance on emerging-market equities on Wednesday, citing increased volatility in Asia and warning that renewed concerns over weaker artificial intelligence (AI) spending could disproportionately weigh on emerging-market Asian markets.

Emerging-market Asian equities have remained volatile lately, with major technology stocks coming under pressure as investors grow increasingly cautious about debt-backed AI spending and the sustainability of returns from those investments.

The broader MSCI's index tracking emerging-market Asian equities slid over 2% on Wednesday, broadly driven by South Korean equities, while a flare-up in Middle East tensions also weighed.

South Korea's benchmark Kospi stock index closed 5.35% lower on the day, dropping more than 20% from a record close in late June and signalling the market is in bear territory.

The latest bout of jitters came on Tuesday, when investors sold Samsung Electronics despite the company forecasting a 19-fold jump in second-quarter operating profit, amid concerns over the durability of the AI-driven boom.

"At least for the next few weeks, the narrative of AI over-spending and any signs of AI capital expenditure being cut can hurt semi stocks and therefore disproportionately affect emerging-market equities," said strategists at HSBC, as they dropped their bullish view on the asset class.

Meanwhile, HSBC upgraded eurozone equities to 'overweight', saying lower consensus growth expectations and a weaker euro should support the region's stocks over the summer months.

Uploaded by Tham Yek Lee