Chinese equities ended the week with a sharp retreat that exposed renewed doubts over both the domestic recovery and the durability of the AI-driven technology rally. Growth stocks bore the brunt: the ChiNext Index fell 4.53% on Monday alone to 3,139.82, leaving it about 7.6% below its September 21 close, while the STAR 50 dropped 4.06% on Monday. The sell-off followed a US-China summit that produced limited tariff relief but no breakthrough on broader trade and technology disputes, while rising global bond yields added pressure to richly valued technology shares.
The broader mainland market held up somewhat better, but still weakened substantially. The Shanghai Composite ended Monday at 3,823.62, down 1.67% on the day and 3.2% from 3,949.91 a week earlier. The CSI 300, representing large Shanghai- and Shenzhen-listed companies, fell 2.22% on Monday to 4,340.76 and was down about 4.4% over five trading days. Shenzhen was harder hit, with its Component Index dropping 3.44% on Monday to 12,858.75, roughly 6.3% below its September 21 level. Technology hardware, communications equipment and semiconductor shares were among the main casualties, while commercial vehicles and some consumer sectors proved more resilient.
The retreat also coincided with fresh evidence that China’s economic recovery remains uneven. Industrial profits rose 4.2% year-on-year in August, slowing sharply from 11.2% in July as weak domestic demand and excess capacity constrained pricing power. Technology manufacturing remains comparatively strong, but the data reinforced concerns that corporate earnings growth is becoming increasingly dependent on high-tech manufacturing and overseas demand.
Hong Kong was comparatively resilient. The Hang Seng Index closed September 28 at 24,642.51, down about 1.6% from 25,042.71 a week earlier, despite gaining 0.54% on Monday. Technology remained weaker: the Hang Seng TECH Index finished at 4,296.00, down about 2.9% over the week. Beijing meanwhile widened mainland insurers’ access to Hong Kong-listed exchange-traded funds through Southbound Stock Connect from September 21, potentially providing another channel for mainland institutional capital into the territory.
Overseas-listed Chinese companies showed similar caution. The Nasdaq Golden Dragon China Index, which tracks US-listed Chinese companies, fell from 5,828.23 on September 21 to 5,687.91 by Friday, a decline of about 2.4%, with Alibaba among the week’s notable technology losers.
The week’s message was therefore less a wholesale rejection of Chinese equities than a reassessment of where growth is coming from. Investors remain willing to back sectors aligned with Beijing’s technology and industrial priorities, but weakening profits, high technology valuations and unresolved US-China tensions are making that enthusiasm more selective. With mainland markets approaching the National Day holiday, the key question is whether policy support and incoming economic data can rebuild confidence beyond the technology themes that have carried much of the market’s recent optimism.