HONG KONG -- Donald Trump's election as U.S. president is shaking up stocks worldwide as interest rates surge amid expectations of more government spending, bringing into question a key assumption underlying global markets.
Hong Kong's benchmark Hang Seng Index slid 1.3% on Friday, dragged down by the poor performance of such technology stocks as Tencent Holdings and China Mobile. HSBC Holdings and Bank of East Asia were among the handful of gainers.
Money is moving from high-tech stocks to financials, said Castor Pang Wai-sun, head of research at Hong Kong brokerage Core Pacific-Yamaichi International.
The U.S. is the epicenter of this seismic shift. Even as the Dow Jones Industrial Average recorded an all-time high Thursday, the technology-focused Nasdaq Composite Index slumped. This polarization likely unsettled many market players. Such major financial companies as Goldman Sachs Group and JPMorgan Chase & Co. jumped 4% or more on expectations that wider interest rate spreads will boost profits, while such tech giants as Facebook, Amazon.com and Netflix sank across the board.
These and other tech companies are deemed momentum stocks because of their high and volatile prices. Bullish investors had pushed them sharply higher in recent years, when funds were easy for these investors to raise.
But Trump's election is starting to change this. The benchmark 10-year Treasury yield climbed to 2.15% Thursday, the highest in about 10 months, in response to the president-elect's promises of generous government spending. The yield has risen 30 basis points from Election Day and more than 80 basis points from the record low set in July. If investors can no longer rely on the low interest rates on which they have based risky investments, they will be forced to rethink their portfolios.
Asian markets followed in the footsteps of the U.S. on Friday. These included not only Hong Kong, but also South Korea, where Samsung Electronics and Naver declined as Woori Bank advanced. The Taiwan Stock Exchange Weighted Index, which tilts heavily toward tech stocks, performed poorly even compared with Asian peers. Taiwan Semiconductor Manufacturing Co. and Hon Hai Precision Industry fell, while Cathay Financial Holdings surged. In Japan, investors bought megabanks and sold Nintendo and Rakuten.
More important is whether higher U.S. interest rates will spark capital flight from emerging markets, fueling further turmoil. Yields on 10-year Mexican government bonds spiked to 7% on Thursday, according to interdealer broker Tullett Prebon -- the highest in five years and up 80 basis points from before the election.
Even if Mexico's disagreement with Trump over a proposed border wall makes this a special case, concerns are mounting over selling of bonds and currencies of countries hit by the currency crisis of the 1990s, including South Korea, Malaysia and Brazil. Rather than welcome the coming Trump market with open arms, market players must coolly assess the wide-ranging impact of changes afoot in a global superpower.
NQN staff writers Atsushi Otani and Kazumi Sakurada contributed to this article.