Bullish Trends Emerge in Chinese Stock Markets After Nine-Day Rally

China's stock markets observed a pause after a nine-day rally, with the Shanghai Composite index settling flat. Despite the break, the markets remain strong with notable performances in the AI, semiconductor, and defense sectors, amidst broader market consolidation and rotational strength.

China's stock markets showed signs of consolidation on Tuesday, with the Shanghai Composite index ending a nine-day winning streak as investors took profits after a strong run. The index closed flat at 3,965.12, marking an abrupt pause in its best win streak since September 2024. Still, a year-to-date gain of over 18% positions the market for its best annual performance since 2019.

The blue-chip CSI300 index saw a slight uptick of 0.3%, experiencing fluctuations throughout the day. Favorable performances emerged from the artificial intelligence sector, which rose 1.3%, and the semiconductor index, which increased by 0.9%. The defense sector also climbed to a three-year high, buoyed by China's live-firing exercises simulating a blockade around Taiwan. Conversely, real estate, healthcare, and insurance sectors lagged, with losses of 2.3%, 0.5%, and around 1%, respectively.

Analysts at Pacific Securities noted a bullish trend emerging amidst sector rotational strength and low option volatility levels. Meanwhile, in Hong Kong, the Hang Seng Index increased by 0.9% and the tech index rose 1.7% to a two-week high. The Hang Seng China Enterprises Index also edged up by 1%, reflecting a strong year for listings as Hong Kong continued to dominate Asian equity capital markets.

(With inputs from agencies.)