Stretched Valuations and AI Fatigue Deepen China and Asia-Wide Sell-Off

Li Chen
17 Jul, 2026
Hong Kong

China's indexes turned sharply lower and extended weekly losses amid growing bearishness towards artificial intelligence trade. 

The Hang Seng Index decreased nearly 2%, and the mainland-focused CSI 300 Index fell about 2.5% as investors questioned the recent rally in AI- and semiconductor-linked stocks. 

Stocks in Shanghai and Hong Kong struggled to rise above the flatline as a global sell-off persists in semiconductor stocks. 

Investors looked ahead to the policymakers gathering later this month following the release of mixed economic data. 

China's economic growth slowed to 4.2% in the second quarter, slower than 5% in the first quarter, but industrial production accelerated following the sustained rise in exports to the ASEAN region, the European Union, and the U.S. 

Economic growth slowed to its lowest pace since late 2022 amid persistent weakness in domestic consumer demand and lingering weakness in the property sector. 

The weakness in property prices across 70 major cities and the weakening job market overshadowed the strong rise in global goods exports in the first half. 

China's economic growth in 2026 is likely to slow to 4.0% and weaken further to 3.5% in 2027. 

 

China Indexes and Stocks 

The Hang Seng Index decreased 1.8% to 24,556.88, and the mainland-focused declined 2.4% to 4,586.72.

Semiconductor-linked stocks led decliners in Hong Kong, Shanghai, and Shenzhen trading. 

Naura Technology declined 2.7% to ¥685.47, Eoptolink Technology fell 6.5% to ¥505.20, Zhongji Innolight plunged 10% to ¥1,001.07, and SMIC fell 6% to $70.65. 

Hygon Information Technology decreased 4.2% to ¥306.86; Cambricon Technologies fell 10.1% to ¥1,207.00.