China Stock Markets Bear Brunt of Global Tech Sell-Off, Rising Oil Prices

It was not only a black Friday but a black week for China's stock markets, with investors soured by higher oil prices triggered by the escalating conflict in Iran and by the global slump in tech shares as concerns mount about the vast sums AI companies are pouring into development.

The benchmark Shanghai Composite Index lost 3.1 percent on Friday, wrapping up the week with a loss of 5.8 percent. The Shenzhen Component Index dropped 5.4 percent on Friday for a weekly decline of 8.9 percent.

The tech-related sector led declines. The tech-heavy ChiNext board in Shenzhen slumped 10.8 percent this week, and the Nasdaq-style STAR Market 50 index in Shanghai lost 16.9 percent. Both boards dived more than 7 percent on Friday, with 198 of more than 5,000 declining Class A shares dropping by the daily limit.

Hong Kong's Hang Seng Index lost 6.1 percent in the past five trading days after a 1.8-percent drop on Friday. The Hang Seng tech index lost 4.4 percent, led by a 28.5-percent plunge in shares of Z.ai (Zhipu) and a 15.6-percent drop in MiniMax.

"Such sharp corrections are not expected though fundamentals remain largely unchanged," said Chen Hongbin, chief economist at Springs Funds. "We project China's market won't remain long in a losing streak fed basically by 'imported' fears."

Semiconductor shares in China fared the worst. Beijing-based GigaDevice Semiconductor, Shenzhen's TWSC and Nantong's Tongfu Microelectronics all fell by the daily limit. It was the same story in South Korea, where chip giants Samsung Electronics and SK Hynix collapsed – Samsung was down 8.8 percent and SK Hynix 11.5 percent in the red ahead of a South Korean holiday on Friday.

Taiwan Semiconductor Manufacturing Co, the world's largest contract chipmaker and a major global beneficiary of the AI boom, didn't benefit from a record profit it reported on Thursday, far exceeding forecasts. Its shares dropped 2.3 percent in New York after the announcement and another 2.8 percent on Friday, as investors focused on its upgrade of 2026 capital spending to as much as US$64 billion from US$56 billion.

"The declines in China markets were somewhat gentler than global counterparts affected by considerations such as rising US interest rates, panic over chip supply shortages and massive capital drainage from large-scale initial public offerings," said Wang Daji, an analyst with Zheshang Securities.

Despite the slump in tech shares, Chinese investors are still looking for the next golden goose in industry prospects. That was evident in strong retail demand for the Shanghai IPO of Chinese memory chip giant ChangXin Memory Technology (CXMT), which looks set to raise up to 66.6 billion yuan (US$9.8 billion), the Chinese mainland's second-largest IPO. The retail portion was 212 times oversubscribed by 9.4 million investors submitting bids. The Hefei-based company is the world's fourth-largest maker of dynamic random-access memory.

The current World Artificial Intelligence Conference held in Shanghai is boosting the outlook for AI technologies. Chinese President Xi Jinping, in a keynote address, reaffirmed Beijing strong support for the AI sector. China and 28 other countries signed an agreement in Shanghai to establish a new intergovernmental body to promote governance and cooperation in global AI development of artificial intelligence.

Elsewhere in Asia, Japan's Nikkei fell 6.4 percent in the past five trading days, and South Korea's Kospi lost 6.5 percent by Thursday.

On Wall Street, markets fell again on Friday. The broad S&P index lost 1 percent to end the week down 1.6 percent, and the tech-heavy Nasdaq lost 1.4 percent for a 2.9-percent weekly loss. Trading sentiment was influenced by escalating attacks in the Iran war, which drove up oil prices, and by concerns about the strength of the AI boom. Shares in SpaceX, after a much-hyped, world-record IPO in June, ended the week below their offer price. The stock fell 5 percent on Friday to US$123.99, compared with the IPO price of US$135.