Chinese Stock Markets Can't Quite Shake Off Bearish Sentiment

Chinese stock markets remained on edge this week, with investor sentiment tilting bearish and tech shares remaining under pressure as the shock from the resignation of high-profile Nvidia Chief Executive Jensen Huang reverberated through global markets.

The benchmark Shanghai Composite Index fell 0.6 percent on Friday and 0.4 percent for the week. Its Nasdaq-style STAR Market 50 index tumbled 2.3 percent on Friday but managed a 1.8 percent gain for the week. The Shenzhen Component Index lost 1.9 percent for the week, and the tech-heavy ChiNext board retreated 1.3 percent after tanking 3.3 percent on Friday. Hong Kong's Hang Seng Index fell 1.6 percent on Friday for a weekly loss of 3.5 percent. Its tech index dropped 3 percent.

The sharp decline in tech stocks was, in part, due to Huang's departure from the AI tech giant he co-founded and ran for three decades. He quit after revelations of an extramarital affair. In China's tech realm, Victory Giant Technology and TFC Communications dropped by the daily limit of 10 percent on Friday. Shares in optical transceiver giant Zhongji Innolight tumbled 8.4 percent, Eoptolink lost 8.8 percent, and electronics maker Foxconn retreated 7.5 percent.

"The exit of Jensen Huang from Nvidia is due to have a huge impact, but at the moment, it's unclear how huge," said Dai Qing, an analyst with Changjiang Securities. "Suppliers and customers of Nvidia in China will have to wait for an evaluation, as well as will the rest of the world."

A Morgan Stanley gauge of Chinese mainland investor sentiment from November 5-11 fell 16 percentage points to 15 percent, with trading volumes contracting. The bank said it remains cautious on Chinese stocks, but favors shares traded on the Chinese mainland over those traded in Hong Kong.

Overall, Chinese equities have lost about US$3.5 trillion in value since May. To bolster the market, Beijing has taken steps to facilitate more equity investment by state-backed funds and more company share buybacks. The China Securities Regulatory Commission reiterated at an investor conference in Shanghai on Thursday that "there is long-term certainty in China's development, which lays a solid foundation for investment."

"The authorities have released quite strong signals of support for the market, but investors fundamentally need more evidence of concrete growth," Dai said.

Morgan Stanley analyst Laura Wang said it's normal to see sentiment and share prices "bumpy" after Beijing steps in with market support.

In Hong Kong trading on Friday, Semiconductor Manufacturing International (SMIC), the largest contract chip foundry on the Chinese mainland, declined 0.5 percent despite reporting a 123 percent increase in third-quarter net profit. The Shanghai-based company said on Friday that the semiconductor supply chain for AI-related applications will stay tight through 2027 on high demand from data centers and cloud computing. It's forecasting 2026 revenue of at least US$12 billion. Chipmaker Hua Hong Grace Semiconductor retreated 6.1 percent.

Among other tech-related shares, Z.ai plunged 10 percent, Minimax lost 8.2 percent, Lenovo dropped 6.3 percent, Kuaishou was off 4.5 percent and Alibaba shed 3.5 percent.

Outperforming the market, oil majors rose as global prices increased again after comments from US leaders seemed to normalize a stalemate in the Iran war. PetroChina gained 2.8 percent, the best-performing bluechip in Hong Kong on Friday, and China Petroleum & Chemical shares added 1.7 percent.

Elsewhere in Asia, Japan's Nikkei climbed out of bear market territory with a 6.5 percent jump this week, and South Korea's Kospi advanced 4.6 percent.

On Wall Street overnight, the tech-heavy Nasdaq dropped nearly 1 percent after a volatile week of trading, but ended the week with a 2.3 percent gain. The broader S&P 500 index closed the week with a 2.5 percent increase.