China stocks rebound but set for second week of losses; Hong Kong shares up

SHANGHAI: China stocks bounced on Friday but were on track to fall for two weeks in a row as soaring tech shares face growing profit-taking pressure.

The Hong Kong market rose as Lenovo Group’s forecast-smashing results boosted sentiment.

China’s blue-chip CSI300 Index climbed 0.7% by the lunch break, but is poised to drop nearly 1% for the week - the worst showing in nearly two months.

The Shanghai Composite Index, which on Thursday logged its biggest drop since March, rose 0.5% in morning trading.

In Hong Kong, benchmark Hang Seng advanced 1.2%, led by tech shares as Lenovo surged 16%.

China stocks have been climbing this year as frenzy toward artificial intelligence helped overcome investor worries about the broader economy.

BNP Paribas said there’s a dramatic improvement in earnings expectations in China and some other Asian economies, but “this is, however, not a broad-based story but one nearly entirely driven by the tech super-cycle.”

The bank warned that “any reversal of the (tech) cycle will create a material headwind to regional equities”, but “in the near-term, it remains the only story.” Goldman also painted a picture of a bifurcated Chinese economy where the red-hot tech sector contrasts with ailing “old economy” industries.

“The ongoing Middle East conflict and higher energy prices have negatively impacted the Chinese economy,” Goldman Sachs said in a note. However, “the Chinese economy has so far been more flexible than expected in adapting to higher oil prices.”

The Wall Street bank said investors should closely monitor Chinese exports, which have been a key growth engine. It also said “there have been some encouraging signs from the property market in top-tier cities.”

Tech shares rebounded sharply from Thursday’s falls. Shenzhen start-up board ChiNext jumped 2% and the CSI Electronics Index gained 2%.

In Hong Kong, the Hang Seng Tech Index climbed 2% while and an index tracking chipmakers jumped nearly 4%.