Key Takeaways
- Chinese stocks fell, with the CSI300 Index dropping 0.3%.
- Sentiment towards AI supply chain shares continued to decline.
- Tech-focused STAR50 Index was down 1.1%.
Chinese stocks experienced a downturn on Wednesday, with the blue-chip CSI300 Index dropping 0.3% by the lunch break. The Shanghai Composite Index remained flat, while Hong Kong’s Hang Seng Index edged up 0.2%. This decline was driven by a selloff in AI-related supply chain shares, particularly in the 5G Communication Index, which fell 1.5%. The tech-focused STAR50 Index also saw a 1.1% drop.
The mixed domestic inflation data also contributed to the market's volatility. Producer prices rose at their fastest pace in over four years in September, while consumer inflation came in below expectations. Energy-related stocks saw a rise, with the Coal Index up 1.2% and the CSI Energy Index climbing nearly 2%. Consumer staple shares gained 0.7%, reflecting some stability in the market.
Despite the overall decline, value stocks have outperformed growth stocks since July. HSBC analysts have cut their end-2026 targets for the Shanghai Composite, CSI300, and Shenzhen Composite indexes by 9% to 15%, implying an upside of 8% to 15% from current levels. The analysts noted that the trend could be temporary, citing the lower valuations and stronger earnings-revision momentum of growth stocks.
Zhongji Innolight, a leading maker of optical transceivers used in AI data centres, saw its share price fall 2.6%. This decline reflects the broader sentiment towards AI supply chain shares, which have been under pressure. The market is now limping into a three-month downtrend, with China’s stock benchmarks near levels hit two years ago.
Tech majors in Hong Kong rebounded, with the index up 1.6%, but it was still hovering near a two-year low. The overall market sentiment remains cautious, with investors digesting the mixed economic data and the ongoing selloff in AI-related shares.
HSBC analysts highlighted that while value stocks have outperformed, the trend could prove temporary. They noted that growth stocks, despite their lower valuations, have stronger earnings-revision momentum, which could influence investor sentiment in the coming months.
