Global Market: China stocks slip as AI selloff deepens, mixed inflation data weighs

Chinese stock benchmarks have struggled to sustain the rally sparked by Beijing's stimulus measures.

The CSI300 Index fell 0.3% by the midday break, while the Shanghai Composite Index was little changed. Hong Kong's Hang Seng Index edged up 0.2%. China's producer prices rose at their fastest pace in more than four years in September, while consumer inflation came in below market expectations. Higher oil and commodity prices pushed up factory-gate costs, but subdued domestic demand continued to limit broader inflationary pressures, the report stated.

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Energy stocks outperformed as oil prices climbed amid concerns over potential supply disruptions involving Saudi Arabia. The Coal Index gained 1.2%, while the CSI Energy Index rose nearly 2%. Consumer staples shares also advanced, climbing 0.7%.

Technology shares remained under pressure, however, as sentiment towards companies linked to the artificial intelligence supply chain continued to deteriorate. The 5G Communication Index dropped 1.5%, while the technology-focused STAR50 Index fell 1.1%. Zhongji Innolight, a leading manufacturer of optical transceivers used in AI data centres, declined 2.6%.

Chinese stock benchmarks have struggled to sustain the rally sparked by Beijing's stimulus measures, which had raised hopes of a prolonged bull market. The recovery has since lost momentum, with the market entering a three-month downtrend and major indexes hovering near levels seen during earlier periods of weakness.

HSBC analysts have lowered their end-2026 targets for the Shanghai Composite, CSI300 and Shenzhen Composite indexes by 9% to 15%, setting them at 4,100, 4,800 and 14,500, respectively. The revised targets imply potential upside of 8% to 15% from current levels.

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Value stocks have outperformed growth shares since July, but HSBC analysts cautioned that the trend could be temporary. They pointed to relatively lower valuations among growth stocks and stronger earnings-revision momentum as factors that could support a reversal, as per the report.

In Hong Kong, technology heavyweights rebounded, with the tech index rising 1.6%. Despite the recovery, the index remained close to a two-year low, highlighting continued investor caution towards the sector.

The divergence between energy and technology stocks reflects the competing forces shaping Chinese markets, as rising commodity prices support some sectors while weak domestic demand and persistent concerns over the outlook for AI-related investments weigh on others.