China stocks edge towards one-year low, dragged down by AI hardware share

Beijing's recent stimulus efforts have propelled Chinese stock benchmarks, but recent developments have brought them perilously close to their lowest point in a year. The CSI300 Index, a key gauge of China's large and mid-sized companies, tumbled 0.3% as investors grappled with declining confidence in AI-related supply chain shares. The Shanghai Composite Index remained stagnant, while Hong Kong's Hang Seng Index ticked up by 0.2%.

Chinese producer prices surged to their highest level in over four years in September, while consumer inflation fell short of expectations. This mix of economic indicators was weighed down by the cost of pricier oil and commodities, despite weak domestic demand keeping broader inflationary pressures in check. Energy-related stocks, buoyed by oil price increases in response to potential supply risks from Saudi Arabia, rose, while the Coal Index climbed nearly 2%. Consumer staple shares, on the other hand, gained 0.7%.

However, sentiment towards AI supply chain shares continued to deteriorate. The 5G Communication Index fell 1.5%, and the tech-focused STAR50 Index dropped 1.1%. Zhongji Innolight, a major player in optical transceivers used in AI data centers, saw its shares decline by 2.6%.

HSBC analysts have revised their end-2026 targets for China's major stock indexes downward by 9% to 15%, to 4,100, 4,800, and 14,500 respectively. This adjustment suggests an upside potential of 8% to 15% from the current levels. While value stocks have outperformed growth stocks since July, the analysts caution that this trend may prove temporary, citing lower valuations and stronger earnings-revision momentum among growth stocks.

Despite this, tech majors in Hong Kong have rebounded, up 1.6%, yet the overall index remains near a two-year low.