China's stock markets showed continued weakness on Friday, with China's blue-chip CSI300 index falling 1.6% by lunch break and the Shanghai Composite Index dropping 1.8% to below the 3,900-point level, according to Reuters. The Hang Seng Index declined nearly 1% in Hong Kong, putting both markets on course for weekly losses amid thin trading volumes and weaker liquidity. For the week, the CSI300 was down 1.6% while the Hang Seng had lost 3.5%, as reported by Reuters. The technology-heavy STAR50 index fell 3%, touching its lowest level since late April, highlighting the broader selloff in Chinese equities. For the week, the Shanghai Composite fell 1.07% while the Shenzhen Component slipped 0.34%, as reported by Business Standard.
Non-ferrous metal stocks led declines in mainland markets, with Zijin Mining Group falling 5.42% and CMOC Group dropping 4.52%, as reported by Business Standard. East Money Information lost 3.48% and CATL declined 2.23%, with the broader selloff in mining stocks driven by elevated oil prices after Trump said he did not expect the Iran war to end before the November midterm elections, adding to concerns that crude prices could remain high. The Hong Kong-listed technology majors also declined, contributing to the overall market weakness, as reported by Reuters.
AI hardware shares rebounded Monday, lifting tech indexes after Friday's sharp drop, as reported by CGTN analyst Timothy Pope. The rotation in and out of semiconductors and component-maker shares continues to be the dominant theme for A-share markets. Tech boards led the advance, with the ChiNext Index rising 3.41% to 3,398.68 and the STAR Composite adding 1.90% to finish at 1,900.89. This rebound follows the central government's announcement of a plan aimed at strengthening funding for rural revitalisation, which had previously boosted agriculture-related stocks by 4.6%. However, the broader technology sector faced pressure with Hong Kong-listed technology majors declining 0.8%, as reported by Reuters.
Losses among major banks and insurers followed the Ministry of Finance's announcement Sunday of a 300-billion-yuan special bond issuance to shore up capital at eight central financial enterprises, according to CGTN analysis. The three biggest drags on the Shanghai Composite were Agricultural Bank of China, Bank of China and ICBC (the Industrial and Commercial Bank of China). For banks, the injections don't really change the core problem they're facing, which is weak demand for credit. For insurers, the special bonds have been used to provide capital for state-owned banks before, but this marks the first time they've been used for insurers, which have been hit by falling government bond yields.
Investor sentiment was further pressured by growing expectations that the U.S. Federal Reserve could raise interest rates again, according to Reuters. U.S. producer prices increased in August, driven by higher costs for goods, airline fares and hospital services, which reinforced concerns that inflationary pressures could remain elevated, increasing the prospect of tighter monetary policy. Investors will now focus on key Chinese economic data due next week, including house prices, fixed-asset investment, industrial output, retail sales and the unemployment rate, as reported by Business Standard. The combination of higher U.S. rate expectations, weaker liquidity and fading momentum in Chinese equities has weighed on risk appetite across regional markets, as reported by Reuters. Despite broader market weakness, Shanghai Enflame Technology surged about 200% in its Shanghai debut, highlighting continued investor appetite for selected AI-related companies even as broader Chinese technology stocks came under pressure.
