HONG KONG: China stocks weakened to their lowest levels in six weeks on Monday, dragged down by the tech sector, after lukewarm factory data added to concerns about slowing growth momentum.
** The Shanghai Composite index lost as much as 0.6% to hit its lowest point since April 17, before dropping 0.3% to 4,057.74 at market close.
** China's blue-chip CSI300 index was down 1%.
** Tech sectors led the decline, with the CSI AI Index down 2.5% and the CSI Semiconductor Index dropping 5.8% to a two-week low. The Star 50 Index slipped 5% to a three-week low.
** Wu Zhou, fund manager at Shenzhen Deyuan Investment, attributed the tech stock dropoff to the sector's outsized gains, overcrowded trades and news that state semiconductor funds were reducing their stakes.
** "The biggest negative is simply that prices have risen too much," Wu said. "Positions are heavily concentrated in chipmaking and AI, and any signs of selling would trigger a stampede," he said, estimating that the top 5% most-traded stocks account for nearly 50% of total market turnover.
** China's factory activity stalled in May as new export orders contracted and input costs kept rising, an official survey showed on Sunday. A private survey on Monday showed the manufacturing sector expanded at a slower pace last month.
** Lukewarm economic readings did little to lift sentiment, with investors potentially taking profits from tech after a recent rally and squaring positions ahead of some highly anticipated chip IPOs like ChangXin Memory Technologies (CXMT), said Kenny Ng, securities strategist at Everbright Securities International.
** In Hong Kong, the benchmark Hang Seng Index was up 0.9% at 25,398.18 and the Hang Seng Tech Index added 1.7% after briefly hitting a two-week high earlier in the session.
** Around the region, MSCI's Asia ex-Japan stock index was firmer by 1.4%. Japan's Nikkei index hit a fresh record high on an artificial intelligence boost.
** Elsewhere, China's planned rebalancing of indexes is expected to trigger an estimated $48 billion in two-way passive investment flows, according to Goldman Sachs, as major indexes undergo semi-annual adjustments later this month. - Reuters
