China, HK shares end lower as AI, property offset strong profit data

HONG KONG: China and Hong Kong stocks retreated from recent highs to close lower on Wednesday, pulled down by AI and property-linked shares despite domestic data showing industrial profits grew at their strongest pace in more than two years.

The Blue-Chip CSI300 Index was down 0.8% at market close, while the Shanghai Composite Index lost 1.3% to 4,093.73, both shedding early gains.

The tech-focused ChiNext Price Index edged 0.1% higher, after jumping as much as 2.6% to an all-time high in early trade.

The chip sector index led losses, down 4.3%, while the AI sector index weakened 1.8%, even as broader AI optimism has lifted regional shares to fresh peaks.

The CSI 300 Real Estate Index slipped 3% to a record low. Property developer China Vanke lost 1.8% as it continued to grapple with its debt crisis.

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“The investment opportunities tied to pure-play AI companies are already widely understood and well-priced in” and as AI draws more retail participation, markets are becoming increasingly divided, analysts at CITIC Securities said in a note.

The barbell structure with high-growth AI names on one end, energy and infrastructure on the other, is here to stay, the analysts said.

UBS APAC equity strategist Karen Hizon said they remain “overweight” on China shares, including Hong Kong stocks, where policy support and compelling valuations drive upside in AI, chips, and EV sectors.

In Hong Kong, the benchmark Hang Seng was down 1.1%. The Hang Seng Tech Index lost 0.8%.

Around the region, MSCI’s Asia ex-Japan stock index was firmer by 1.2%.

On the data front, China’s industrial profits in April grew at the fastest pace since November 2023, despite financial pressures stemming from soft domestic demand and higher component costs exacerbated by the Middle East crisis.