China, Hong Kong stocks edge lower as tech shares extend slide

China and Hong Kong stocks edged lower on Tuesday, reversing their early gains as technology shares continued their downward trajectory. By midday, the Shanghai Composite index fell 0.1% to 3,692.58 points, while blue-chip CSI300 index also declined by 0.1%. The tech sector was the primary driver of the declines, with the ChiNext Composite index dropping 0.5% and Shanghai's tech-focused STAR50 index falling 1.5%.

The ongoing sell-off in Chinese AI-related shares persisted, with the CSI Semiconductor Index sinking to a six-month low and the CSI AI Index dropping 0.8%. This decline reflected the fragile nature of risk sentiment. Meanwhile, the defensive CSI Banks Index rose by 0.8%.

In Hong Kong, the benchmark Hang Seng Index slipped 0.1% and the Hang Seng Tech Index declined 0.8%. Analysts at Sinolink Securities noted that the market may experience a short-term rebound following the recent sell-off, but sustained recovery would require further de-leveraging over the medium term, as some overextended positions have yet to be fully liquidated.

On Monday, China's central bank announced plans to establish a swap facility to provide emergency liquidity to non-bank financial institutions facing large-scale redemptions. This move could help maintain short-term liquidity conditions, according to Huajin Securities analysts.

Elsewhere, data released on Tuesday indicated that China's industrial profits grew more rapidly in September, but the sectoral gap remained evident. Across the region, Asian stocks rose on Tuesday as AI firm Anthropic's highly anticipated IPO filing boosted risk appetite ahead of tech earnings—a crucial test for the AI trade. Additionally, central bank meetings were expected to influence short-term interest rates.