Mainland Chinese stocks advanced on Friday, though major benchmarks remained on course for weekly losses, as fading momentum in artificial intelligence (AI) shares and elevated US Treasury yields continued to weigh on investor sentiment.

The CSI300 and the Shanghai Composite each rose 0.4%, while Hong Kong's Hang Seng Index climbed 2.1%, driven by a rebound in technology stocks.

Despite the Friday bounce, mainland indexes were still eyeing losses for the week as a whole. The pullback comes as the AI-driven rally that had lifted technology names in recent months showed signs of cooling, while higher US Treasury yields added pressure to global equities. Rising yields tend to make bonds more attractive relative to stocks and can be particularly challenging for growth-oriented technology companies, whose valuations often rest on earnings expected far in the future.

The movement in Hong Kong reflected a broader recovery in Chinese technology stocks, a sector that had been among the biggest beneficiaries of the earlier AI-driven advance. Chinese tech firms, along with their US counterparts, had seen sharp gains over recent months as investor enthusiasm around AI development and deployment lifted valuations across the sector, making it sensitive to any change in that narrative.

Investors have also been shifting toward traditional sectors, a rotation often observed when enthusiasm for high-growth technology shares wanes.

For markets ahead, the direction of US Treasury yields and any further signs of cooling in AI-related sentiment are likely to remain key influences on Chinese and Hong Kong equities, given the sector's outsized role in recent market moves.

Source: Economic Times Markets