Shanghai stocks scale 10-year high as chip, AI firms jump

SHANGHAI: Shanghai stocks hit a 10-year high on Friday while the mood in Hong Kong was also upbeat toward the end of a volatile week, as chip-making and artificial intelligence (AI) stocks climbed after Beijing vowed to focus on technology and security.

Policymakers’ pledge to “resolutely” achieve economic targets this year also injected optimism into a market clouded by tariff uncertainty as Chinese and US leaders are expected to meet next week in South Korea to defuse trade tensions.

The Shanghai Composite Index rose 0.4% by the midday break, having hit the highest since August 2015.

The blue-chip CSI300 Index climbed 0.7%, on track for its best week in two months. In Hong Kong, benchmark Hang Seng Index gained 0.6%.

On Thursday, China’s Communist Party elite pledged more efforts to achieve technological self-reliance at the end of a four-day closed-door meeting known as a plenum.

Goldman Sachs said that setting technology and security as top priorities for China’s growth strategy over 2026-30 reflects Beijing’s long-term pursuit for “high-quality growth” and “high-level security”.

China’s chipmakers and AI stocks - key in China’s power rivalry with the US- jumped in response.

“We are constructive in what is potentially just the beginning of a longer-term trend in China,” Megan Ie, senior equity analyst at GIB Asset Management said, referring to China’s tech sector.

“This is a development that is underwritten from the top … the demand and the trend is real.”

She added that China’s highly digitalised economy means the country is one of the most ready to have a meaningful application of AI across a range of industries.

The market was also buoyed by expectations of fresh stimulus.

“We reckon that, after the 4th Plenum this week, policy focus might be once again shifted to ensuring short-term growth stability and ending deflation,” Nomura said in a note.

“Fiscal expansion will likely be stepped up, policy rates could be moderately cut, and arrears might be further cleared.”

Consumer stocks dropped as investors expect few forceful measures to boost domestic demand.

Financial and real estate shares also declined as the sectors were hardly mentioned in China’s five-year plan.