Do Asian markets move inversely or in lockstep with Western stocks? Analysts weight in on the debate

"Rise in the East, fall in the West?" After the close of trading on Friday, many investors are questioning the old idiom that capital flows into Asia when markets elsewhere are weak.

The skepticism arose after many Asia markets delivered lackluster performances despite 2.5 percent declines in the Dow Jones Industrial Average and Nasdaq Composite Index in the last five trading days.

Analysts have attributed the declines in Western markets to concerns about trade wars, geopolitical tensions, inflation fears and sagging consumer sentiment.

The A-share market in Shanghai fell 1.3 percent on Friday to end below 3,400 points after weeks of big gains. The Shenzhen Component Index fell 1.8 percent, and the Growth Enterprise Market Index retreated 2.2 percent.

In Japan on Friday, the Nikkei Index slid 0.2 percent, while the Kospi in South Korea eked out a 0.2 percent gain. Hong Kong, the Hang Seng Index managed a 2.2 percent gain but lost 1.1 percent on the week. The Hang Seng Tech Index tanked 3.4 percent.

Some analysts said Chinese markets were due for a correction after strong performances since the beginning of the year. Dong Zhongyun, chief economist at AVIC Securities, said the current environment is a test for a certain degree of "negative correlation" between China and US markets.

"The dominant analysis for the recent rise of Chinese stock shares, especially the technology sector, is based on positive expectations toward Chinese tech industries, inspired by star companies like DeepSeek," Dong said. "Currently, it works well for the hypothesis of a 'rise in the East and a fall in the West', but it may not be sustainable in the long term."

Although the recent AI breakthrough by DeepSeek wrought some negative impact on the shares of rival companies like US-based Nvidia, Jensen Huang, chief executive of Nvidia, said the release of DeepSeek-R1 is beneficial to the whole AI market and "will not reduce the demand for computing resources, but rather will accelerate the adoption of AI."

Beijing-based private equity investment firm Starock said in a note that global market enthusiasm for the technology sector is "somewhat subsiding" and needs solid fundamentals to support continuing growth.

"Although sectors at lower valuation levels are in a favorable position in terms of attracting investment, more power is needed to further drive growth," it said.

Xun Yugen, chief economist at Haitong Securities, cited examples of "same-direction correlation" in global stock markets. Since the start of the 21st century, he said, declines exceeding 15 percent on the widely watched S&P 500 Index in New York have produced similar declines in the A-share and Hong Kong markets.

"It can be observed that behind the bearish trend of the US stock market, there is often a simultaneous decline in the US corporate earnings," Xun said. "The overall pattern of globalization has not undergone fundamental changes albeit intensified trade protectionism and geopolitical tension. Considering its economic influence, the United States still occupies a core position."

Zhang Gang, an analyst at Central China Securities, suggested investors be prepared for volatility as markets enter a peak season of annual reports.

"For leading shares like tech titan Xiaomi Corp, which released 'better-than-expected' results last week but still suffered a deep loss on Friday, companies need to further improve fundamentals to meet the expectations of investors," Zhang said.