Global Market: China stocks hit over one-year low as AI selloff deepens; Hong Kong rebounds

Chinese blue-chip stocks fell to their lowest level in more than a year on Friday as a selloff in artificial intelligence-related supply chain shares intensified, while Hong Kong equities rebounded on gains in internet companies, Reuters reported.

The CSI300 Index declined 1.3% by the lunch break, touching its lowest level since August 2025, while the Shanghai Composite Index dropped 1.2%. In contrast, Hong Kong’s Hang Seng Index rose 1.1%, supported by a recovery in technology stocks.

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Technology shares remained under pressure in mainland China. The 5G Communication Index fell as much as 6% to a two-month low, while the tech-heavy STAR50 Index slid nearly 4%, extending its decline to a five-month low. Zhongji Innolight, a major supplier of optical transceivers used in AI data centres, fell 5.4%, while memory chipmaker CXMT lost nearly 5%.

According to Reuters, Chinese stock benchmarks have been approaching levels last seen around two years ago, when a wave of government stimulus sparked a rally and raised hopes of a sustained bull market. That recovery has since lost momentum, and equities have been in a three-month downtrend.

Investors rotated towards more defensive and traditional sectors amid the technology selloff. The Coal Index gained 1.4%, while consumer staples shares rose 0.6%, indicating a preference for relatively defensive investments as risk appetite weakened.

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Hong Kong technology majors advanced 1.6%, helping the broader market recover. However, the Hang Seng Index remained close to a two-year low, highlighting continued caution among investors despite the rebound.

Currency concerns also weighed on sentiment. China's central bank pushed back on Thursday against foreign criticism of its exchange-rate policy, maintaining that Beijing had never pursued competitive currency depreciation. The response came as European policymakers called for a stronger yuan to help address China's record trade surplus and export surge, Reuters reported.

A stronger yuan could create additional earnings pressure for Chinese companies with significant overseas revenue, particularly those that have not adequately hedged their foreign-exchange exposure. UBS analysts said such companies could face a more sustained headwind if the currency appreciates.

The combination of weakness in AI-linked stocks, currency-related concerns and diminishing momentum in the broader market has added to pressure on Chinese equities, even as selective gains in Hong Kong technology shares and defensive mainland sectors offered some relief.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)