Big Tech Selloff Reverses, China Markets End Week Higher

The recent selloff in tech shares ended abruptly on Friday, with Chinese markets following a global rebound. It's too early yet to gauge whether the recovery is just a temporary respite or a longer-lasting change in investor sentiment on the sector.

The tech-focused ChiNext in Shenzhen and the STAR Market 50 index in Shanghai both jumped more than 3 percent on Friday, while the benchmark Shanghai Composite Index rose 0.7 percent and the Shenzhen Component Index gained 2.2 percent.

But weekly tallies fell, reflecting losses earlier in the week. The ChiNext fell 6.5 percent and lost 23 percent in July. The STAR Market index declined 8.5 percent in the week, slumping 26 percent for the month.

"The markets are apparently guided by tech shares and people's wavering sentiment towards them, especially with a number of big IPOs coming in rapid succession," said Jiang Yifan, an analyst with Shenwan Hongyuan Securities.

Changxin Memory Technologies (CXMT), the world's fourth-largest maker of dynamic random-access memory, started the trading week with a bang. Its shares surged 465 percent in their debut on the STAR Market on Monday, and by Friday, the shares were 523 percent higher than their offer price. The US$8.6-billion IPO, biggest on the Chinese mainland in seven years, catapulted CXMT to China's most valuable listed company, overtaking financial giant Industrial and Commercial Bank of China. The shares got a further boost from the news that they will be added to the widely watched MSCI China All Shares Index on August 10.

In Hong Kong, shares in Zhongji Innolight, the world's largest producer of optical transceivers used in AI data centers, recovered from a 2-percent drop in their Thursday debut, bouncing back to 7 percent above their offer price on Friday.

Waiting in the wings is Hangzhou-based Unitree Robotics' IPO on the STAR Market, set to begin taking subscriptions next week. The company is reportedly seeking to raise 4.2 billion yuan (US$620 million) at an implied valuation of 42 billion yuan. It's unclear how this week's US announcement of a ban on imports of Chinese humanoid robots will affect the share sale. Unitree led global shipments of humanoid robots last year with 5,500 units, with the US accounting for 13 percent of revenue.

Elsewhere in Asia, markets rose on the tech rebound. The reversal of fortunes was particularly stark in South Korea, where the Kospi index shot up 18 percent on Friday, led by its two market heavyweights, chipmakers Samsung Electronics and SK Hynix. Samsung shares surged 27 percent, and SK Hynix skyrocketed 30 percent. But despite the gains, the Kospi tumbled 18.5 percent in July. Japan's Nikkei rose 4 percent on Friday but lost 7.7 percent in the month.

The Hang Seng Index in Hong Kong managed only a 0.1 percent gain on Friday, despite a 0.5 percent increase in its tech index. Chinese computer maker Lenovo rose nearly 10 percent, Alibaba was up 4.6 percent, Shanghai-based Semiconductor Manufacturing International Corporation rose 2 percent, and video-sharing platform Kuaishou ended with a 1.8 percent gain. Car and smartphone maker Xiaomi was the worst-performing bluechip with a 7.3 percent loss.

"The general rises in Asian stocks on Friday indicate easing panic among investors and strengthened support for tech industries, especially in AI," said Liu Yu, chief economist at Industrial Securities.

On Thursday, China's top leadership pledged measures to bolster confidence in capital markets. Policymakers said China will maintain a more proactive fiscal policy and a "moderately loose" monetary policy, while stressing the acceleration of the "AI Plus" initiative to develop digital technologies.

"But markets should learn to grow on their own, not relying too much on national support," cautioned Chinese economist Lian Ping. "The expectation that the 'national team' will come to the rescue need to be rectified, while stable performance of listed companies and sound market infrastructure should be the fundamental support for a market."

On Wall Street, strong earnings reports from tech heavyweights like Microsoft and Amazon ended a six-day Nasdaq slump on Thursday. The index rose 1 percent on Friday, for a weekly gain of 1.6 percent.