Chinese equities fell sharply on Friday, putting benchmark indexes on track for their largest weekly decline in two and a half years. Concerns grew that the large IPO of memory chipmaker CXMT could drain liquidity from the market. Expectations of further major domestic offerings added to weak sentiment, especially in technology shares. Hong Kong stocks also declined, led by tech names, as renewed tensions over the Iran conflict increased uncertainty. The CSI300 Index dropped 2.5 percent by midday, reaching a three-month low, while the Shanghai Composite Index fell 1.6 percent. Both indexes are set for their weakest weekly performance since late December 2024. Technology stocks led the sell-off as investors feared large fundraising rounds would pull funds from the secondary market. The CSI AI Index and CSI Integrated Circuits Index each fell about 6 percent, and the STAR Chip Index declined 5 percent. The Hang Seng Index in Hong Kong dropped 2 percent, its biggest one-day fall in nearly four months. AI, biotechnology and semiconductor stocks were among the heaviest losers. Market attention centered on CXMT’s $8.6 billion IPO, the largest in Asia this year. Retail subscriptions exceeded available shares by more than 200 times, though this was lower than recent Chinese IPOs, signaling caution. Analysts said the offering prompted investors to move money out of existing tech stocks. Expectations of further large listings by firms such as robotics maker Unitree and Yangtze Memory Technologies raised worries that new offerings would continue to reduce market liquidity. Some fund managers noted investors were locking in gains after a rally in semiconductor-related stocks tied to the CXMT fundraising. Elevated valuations in AI stocks left the sector open to profit-taking amid tighter liquidity. China’s state-backed Shanghai Securities Journal said large IPOs do not change the overall direction of the equity market and that liquidity remains ample. Investor sentiment stayed fragile, however, as liquidity concerns, high tech valuations and geopolitical risks weighed on mainland and Hong Kong equities.
