HONG KONG: Chinese shares closed down on Wednesday, retreating from a strong rally in the morning session driven by artificial intelligence stocks, as some investors grew wary of the sustainability of the gains.
At the close, the Shanghai Composite index was down as much as 1.76 percent, the biggest daily loss since April 2025.
The blue-chip CSI300 index dropped 1.49 percent.
Hong Kong benchmark Hang Seng declined 1.27 percent, while the Hang Seng Tech lost 1.47 percent. Most sectors closed lower with property and biotech stocks leading the losses.
AI stocks pared gains after an early surge as the State Council released an “AI Plus” initiative to bolster the application of AI in various fields, boosting sentiment.
Yet the economic data fuels concerns. Official data shows China’s industrial profits fell for a third consecutive month in July on demand and deflation woes.
“The lifespan of this equity rally remains uncertain,” analysts at UBS Global Wealth Management said in a note.
Given the deteriorating macro conditions, investors may shift focus to the Fourth Plenary in October, awaiting new measures to support the economy.
Despite the improving sentiment on China’s AI and semiconductor sector, most software and hardware companies continue to show relatively weak fundamentals based on their second-quarter earnings, UBS added.
Shares of Cambricon Technologies 688256.SS jumped over 8 percent to another record high in the morning session before closing 3.2 percent higher, after the AI chip maker swung to profit in the first half.
The smaller Shenzhen index ended down 1.91 percent and the start-up board ChiNext Composite Index was weaker by 0.69 percent.
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