July Could Be the Worst Month for Chinese Stocks in 10 Years

Shares of Chinese tech companies fell on Thursday, July 30, after AI equipment suppliers were caught up in a global sell-off. This put mainland Chinese stocks on track for their worst month in a decade, according to the Financial Times (FT).

China’s CSI 300 Index, which tracks the shares of the 300 largest companies listed on the Shanghai and Shenzhen stock exchanges, fell 1.1% on Thursday, and for the month of July, the index fell 8.6%, marking its sharpest decline since January 2016, the FT notes. China’s CSI AI Index, which tracks companies in the artificial intelligence sector, closed down 5.8%. The combined market capitalization of mainland China’s three leading AI companies—Innolight, Eoptolink (-11.9%), and Cambricon Technologies (-9%)—shrank by approximately $34 billion on Thursday. Innolight’s shares in Hong Kong plummeted by nearly 10% on their first trading day following a secondary listing.

The decline in Chinese stock prices followed a sharp drop in shares of chipmakers and AI-related companies in South Korea, — where the KOSPI index has plummeted by nearly 40% since mid-June following a massive rally in the second quarter. “Chinese AI stocks are moving in lockstep with global AI-related stocks,” said Grace Tam, Deputy Chief Investment Officer for the Asia-Pacific region at BNP Paribas Wealth Management.

The sell-off comes amid investor concerns about the return on the massive AI investments made by major U.S. tech companies and the release of quarterly earnings reports from U.S. Big Tech firms. For example, last week Alphabet reported a negative cash flow for the first time in its history, while also announcing an increase in capital expenditures. Meanwhile, Meta recently presented a revenue forecast for the current quarter that fell short of expectations and also reported a sharp decline in free cash flow.

"The recent financial results of several major U.S. tech giants fell short of market expectations, dampening optimism about growth in the tech sector," said Kenny Ng, a securities market strategist at Everbright Securities International.

The performance of Chinese stocks also marks a reversal from Monday’s market euphoria, July 27, when shares of CXMT, one of China’s largest chip manufacturers, surged 466% on their first day of trading following their IPO on the Shanghai Stock Exchange. The CSI 300 Index rose 1% during trading on July 27. The CSI Index rose 1.5% on the same day.

This article was AI-translated and verified by a human editor