China's CSI 300 index is on track for its worst month in a decade after a global tech sell-off hit the suppliers behind the AI build-out. Three of the mainland's top AI companies shed about $34bn in combined market value on Thursday, and Zhongji Innolight's Hong Kong debut fell as much as 10% the same day.
Chinese technology shares tumbled on Thursday after "picks and shovels" suppliers to the AI boom were caught up in a global tech sell-off, putting mainland stocks on track for their worst month in a decade. The CSI 300 index has fallen 8.6% so far this month, its biggest drop since January 2016. China's CSI AI index closed down 5.8%.
US tech earnings trigger the selling
The falls followed US tech earnings from heavy spenders on AI. Kenny Ng, a securities strategist at Everbright Securities International, said recent results from several major US tech giants fell short of market expectations, dampening optimism surrounding tech sector growth.
The decline in Chinese shares follows steep falls in other tech-heavy Asian markets led by South Korea, where the Kospi index has fallen almost 40% since mid-June following a huge run-up in share prices. It also marks a sharp reversal from market euphoria on Monday, when shares in CXMT, one of the country's biggest chipmakers, rose 466% on their first day of trading.
China's "national team" bought into the market ahead of CXMT's initial public offering, helping boost Chinese indices even as other Asian markets dropped as a sell-off in AI suppliers gathered pace. The combined market capitalisation of Innolight, Eoptolink and Cambricon Technologies — three of mainland China's top AI companies — fell by about $34bn on Thursday.
Innolight's Hong Kong listing falls as much as 10% on debut
Zhongji Innolight, which is already listed in Shenzhen, fell to as low as HK$880 after pricing its Hong Kong shares at HK$980. The Shandong-based maker of optical transceivers and interconnects raised HK$53.4bn ($6.8bn), with an option to sell additional shares that could bring the figure to $7.8bn.
Its Shenzhen shares have risen more than 4,000% since the start of 2023 as it sold into data centres in both China and the west. But those shares have fallen nearly 40% from their peak in June alongside drops in tech indices around the world.
Tencent and Alibaba escape the worst
According to the FT, BNP Paribas Wealth Management's Grace Tam said: "China AI stocks move quite in line with global AI stocks".
Chinese tech giants Tencent and Alibaba were relatively unscathed, rising 1.3% and falling 1.2%, respectively. Both have nevertheless underperformed this year, dropping 21.1% and 21.4%, respectively.
Sources: FT Markets, FT Markets
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