China stocks dip to six-week low as tech firms drag, factory activity stalls

[HONG KONG] China stocks weakened to their lowest levels in six weeks on Monday (Jun 1), dragged down by the technology sector, after lukewarm factory data added to concerns about slowing growth momentum.

The Shanghai Composite index lost as much as 0.6 per cent to hit its lowest point since Apr 17, before dropping 0.3 per cent to 4,057.74 at market close.

China’s blue-chip CSI300 index was down 1 per cent.

Tech sectors led the decline, with the CSI AI Index down 2.5 per cent and the CSI Semiconductor Index dropping 5.8 per cent to a two-week low. The Star 50 Index slipped 5 per cent to a three-week low.

Wu Zhou, fund manager at Shenzhen Deyuan Investment, attributed the tech stock drop-off to the sector’s outsized gains, overcrowded trades and news that state semiconductor funds were reducing their stakes.

“The biggest negative is simply that prices have risen too much,” Wu said. “Positions are heavily concentrated in chipmaking and AI, and any signs of selling would trigger a stampede.”

He estimated that the top 5 per cent of most-traded stocks account for nearly 50 per cent of total market turnover.

China’s factory activity stalled in May as new export orders contracted and input costs kept rising, an official survey showed on Sunday. A private survey on Monday showed the manufacturing sector expanded at a slower pace last month.

Lukewarm economic readings did little to lift sentiment, with investors potentially taking profits from tech after a recent rally and squaring positions ahead of some highly anticipated chip initial public offerings such as ChangXin Memory Technologies, said Kenny Ng, securities strategist at Everbright Securities International.

SEE ALSO

China’s private factory gauge slows as economy softens

In Hong Kong, the benchmark Hang Seng Index was up 0.9 per cent at 25,398.18. The Hang Seng Tech Index added 1.7 per cent after briefly hitting a two-week high earlier in the session.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 1.4 per cent. Japan’s Nikkei index hit a fresh record high on an artificial intelligence boost.

Elsewhere, China’s planned rebalancing of indices is expected to trigger an estimated US$48 billion in two-way passive investment flows, noted Goldman Sachs, as major indices undergo semi-annual adjustments later this month. REUTERS