Chinese technology stocks rallied sharply on Friday, mirroring gains on Wall Street and across Asian markets, as investors regained confidence that the recent global sell-off in artificial intelligence-related shares may be easing. According to Reuters, optimism surrounding China's policy support for innovation also boosted sentiment, with the tech-heavy STAR50 index jumping 6% by midday and the CHINEXT Composite Index climbing 4.9%. Broader markets also advanced, with the Shanghai Composite Index rising 0.8% and the blue-chip CSI 300 Index gaining 1.2%. The recovery came after Thursday's decline when the CSI300 index fell 2.2% and the Shanghai Composite declined 1.2%, as reported by Reuters.
Investor sentiment improved significantly after China's top leadership pledged at a high-level meeting on Thursday to accelerate breakthroughs in frontier technologies and promote the development of future industries. The commitment reinforced expectations that Beijing will continue backing strategic sectors such as artificial intelligence, advanced manufacturing, and high-tech innovation. As reported by Reuters, analysts at BNP Paribas noted that although the latest leadership meeting offered few major surprises on stimulus for the struggling property sector or consumer demand, policymakers once again emphasized deepening reforms in capital market financing and investment. The analysts said the renewed focus on strengthening market resilience and investor confidence suggests authorities remain committed to supporting equities amid recent market weakness.
Semiconductor stocks witnessed particularly sharp declines, with China's telecommunications services sector, home to major optical transceiver manufacturers such as Eoptolink Technology and Zhongji Innolight, plunging 11% by midday. According to Reuters, sectoral indexes tracking semiconductor and AI companies also slumped about 8%. The technology-focused STAR50 Index dropped 6.34%, while the broader weakness in semiconductor stocks came after South Korea's chip-heavy KOSPI Index suffered sharp losses following earnings from memory chip giant SK Hynix that failed to meet elevated investor expectations despite posting strong quarterly results. However, China's leading memory chipmaker CXMT bucked the broader trend, with its shares rising 3.7%, providing some relief to the sector. Major chip-related stocks such as Cambricon Technologies, Zhongji Innolight, Eoptolink Technology, GigaDevice Semiconductor, and SMIC posted steep losses during the session.
Despite Friday's rebound, the broader economic picture in China remained mixed with concerning manufacturing data. Manufacturing activity contracted in July for the first time since February, while growth in the services sector also slowed more than expected, pointing to continued weakness in domestic demand. As reported by Business Standard, this mixed economic data reflects ongoing concerns over the pace of China's economic recovery. Despite investor optimism about AI investments, the economic fundamentals suggest that domestic demand remains under pressure, highlighting the complex dynamics facing Chinese markets.
Despite Friday's rebound, Chinese markets had a weak month overall with the Shanghai Composite declining 6.4% in July, while the Shenzhen Component fell 16.2%, reflecting continued concerns over the pace of China's economic recovery. This represents a significant deterioration from previous months and highlights the sustained pressure on Chinese markets despite the recent recovery in technology shares. The monthly decline reflects broader economic concerns, with Reuters reporting that China's factory activity unexpectedly slipped into contraction in July, reflecting weaker new orders, soft domestic demand, slowing economic momentum, and elevated production costs.
