Asia-Pacific markets collapse as AI bubble fears meet China reality check

Major Asia-Pacific markets closed lower on Monday, December 15, as investors digested mixed economic signals from China and a sharp sell-off in U.S. artificial intelligence (AI) stocks at the end of last week.

South Korea’s benchmark Kospi led the regional decline, falling 2.16% dragged down by steep losses in major chipmakers.

Samsung electronics dropped 3.3% and SK Hynix plunged over 4%, mirroring the retreat in their U.S. counterparts.

Japan’s Nikkei 225 slid 1.3%, Australia’s S&P/ ASX 200 lost 0.66%, and Hong Kong’s Hang Seng Index declined 0.79%.

The session was dominated by the release of key Chinese economic indicators for November, which painted a picture of fragile domestic demand.

There’s 1.3% year-on-year increase in retail sales, significantly missing the Reuters forecast of 2.8% and slowing sharply from October’s 2.9% growth.

Industrial output increased 4.8%, slightly below expectations.

On the contrary, Japan provided a rare bright spot. The Bank of Japan’s closely watched Tankan survey showed business sentiment among large manufacturers rose to +15 in the fourth quarter, its highest level in four years and matching analyst forecasts.

The readings come ahead of a pivotal Bank of Japan policy meeting this week, where officials are widely expected to raise interest rates.

The regional downturn followed a sharp Friday retreat on Wall Street, where S&P 500 fell 1.07% in its worst session in three weeks.

The tech-heavy Nasdaq Composite dropped 1.69%, led by a dramatic 11.4% plunge in shares of Broadcom.

Looking ahead, traders remain focused on central bank policy, with the Bank of Japan’s decision and the U.S. Federal Reserve’s updated economic projections due this week.

It is anticipated that the sustainability of AI-driven rally and the strength of China’s consumer recovery are likely to continue dictating near-term market sentiment.