Hong Kong Stocks Nosedive to Two-Week Low Amid US and Regional Market Instability: Traders Shift to Risk-Off Mode as Japanese Yen Surges

Shares in Hong Kong plummet to a fortnight's low due to turbulence in the US and other regional markets. Investors adopted a more cautious strategy in light of disappointing US industrial production figures and a significant increase in the value of the Japanese yen.

The Hang Seng Index experienced a 1.1 per cent decline, closing at 17,457.34, which is the lowest it has been since August 21. The Hang Seng Tech Index also saw a decrease of 0.4 per cent, while the Shanghai Composite Index pulled back by 0.7 per cent.

Japan's Nikkei 225 experienced a significant drop of 4.2 per cent while Taiwan's Taiex saw a 4.5 per cent decrease, marking them as the most poorly performing in Asia. This came after the S&P 500 experienced its sharpest fall since August, with a decline of 2.1 per cent overnight. The VIX Index, also known as the fear gauge, saw a substantial surge. The artificial intelligence chip manufacturer, Nvidia, saw an unprecedented loss of US$279 billion in market value.

Investors moved towards a more cautious strategy following a report indicating that US manufacturing activity has declined for the fifth consecutive month in August. This situation eclipsed the ideal condition of steady growth and low inflation.

In the meantime, the central bank of Japan continues to express its assertive stance on monetary policy, restating that it will persist in increasing the cost of borrowing if the economy and inflation keep improving. This statement boosted the yen's value, which could potentially disrupt the carry trade further, a factor that had previously disturbed the international financial markets the month before. The Japanese currency increased by 0.3 percent against the US dollar on Wednesday, building on a 1 percent rise from the previous day.