China, Hong Kong stocks fall after flare-up in Middle East tensions

SHANGHAI: China and Hong Kong stocks fell with Asian markets on Thursday, as Middle East tensions flared, but Chinese chipmakers jumped on bets of domestic breakthroughs.

In China, the large-cap CSI300 Index fell 0.6% by the lunch break, while the Shanghai Composite Index lost 0.4%.

Hong Kong’s Hang Seng Index declined 1.4%. Israel and Lebanon agreed to implement a ceasefire to end hostilities, boosting hopes for a broader deal to end the US-Israeli war on Iran.

However, hostility continued to simmer in the region, with Tehran striking Kuwait, damaging its airport and injuring dozens, and the US military carrying out strikes near the Strait of Hormuz.

The uncertainty drove investors into risk-off mode, with Asian markets falling 1.5%, following overnight weakness on Wall Street. Chinese chipmakers stood out amid hopes domestic players will sidestep Washington’s sanctions and export controls.

The optimism was fed by news that DeepSeek, China’s best-known AI startup, is set to raise about 50 billion yuan ($7.4 billion) in its first funding round from investors including Tencent Holdings and CATL.

Earlier this month, China’s AI champion Huawei said it can make industry-leading semiconductors within five years.

“The hopes for China’s AI expansion are increasingly pinned to progress in domestic chipmaking,” said Tilly Zhang, analyst at Gavekal Dragonomics.

The STAR Semiconductor Material & Equipment Index jumped 4%.

The CSI Semiconductor Industry Index gained 2.5%.

Meanwhile, China coal stocks rose sharply on bets that coal miners will benefit from a prolonged oil shock. Most sectors fell, with metal and materials stocks leading the declines.‑Reuters