China, HK stocks steady as AI hardware bounce counters weak data

Shanghai and Hong Kong markets remained stable on Tuesday as gains in AI hardware stocks did not counterbalance losses in other sectors, amid mixed August economic data hinting at ongoing weak domestic demand. China's top CSI300 Index closed flat by midday, while the Shanghai Composite Index slipped 0.1%. Hong Kong's Hang Seng Index declined by 0.2%.

Industrial production in China surged in August, but concerns lingered over economic disparities as consumption slowed and investment declined. Housing prices continued to drop in August, highlighting the persistent weakness in the real estate market. The CSI 300 Financial and Real Estate Index dropped nearly 1% each, while consumer staple shares remained unchanged.

Barclays analysts noted that weak credit demand in August strengthened their belief that domestic demand recovery remains uncertain, and they continue to forecast a below-consensus 4.5% GDP growth for 2026. The tech-oriented STAR50 Index climbed up to 3%, marking its first upward movement in a week after reaching a four-and-a-half month low. The CSI Semiconductor Material and Equipment Thematic Index also rose by 2.7%.

Onshore sentiment has deteriorated over the past month following investors' profit-taking from a record-breaking AI-led rally earlier in the year. Additionally, liquidity conditions have become tighter, with daily turnover of onshore shares hovering at the lowest level since April for the past week. Hong Kong tech giants rose 0.8%, with Tencent gaining nearly 3%. Shares of Guangdong Tianyu Semiconductor surged more than 8% after announcing a share buyback plan.