Chinese technology stocks rallied sharply on Friday, in step with a broader recovery across global markets. Investors regained confidence as the recent artificial intelligence sell-off showed signs of easing, while fresh policy support for innovation further lifted sentiment in the sector. The global AI-related correction had pressured technology shares worldwide, and Chinese equities moved in tandem as risk appetite returned.

The rebound in Chinese tech shares came after a period of pressure on major indexes, which have posted steep monthly declines. Sentiment was bolstered by indications that authorities are leaning into pro-innovation measures aimed at supporting the technology sector, part of a broader push for self-sufficiency in semiconductors, artificial intelligence, and other strategic technologies.

However, the rally unfolded against a backdrop of softer macroeconomic data. Factory activity unexpectedly slipped into contraction territory, reflecting weaker domestic demand and underscoring ongoing challenges for the world's second-largest economy. The manufacturing purchasing managers' index falling below the 50 threshold separating expansion from contraction highlighted the uneven nature of China's post-pandemic recovery.

Meanwhile, trade discussions between global leaders continued, with attention turning to a potential meeting as early as September. Market participants are closely watching these diplomatic developments for signals that could influence cross-border trade and technology-sector dynamics, particularly given the export controls and tariffs that have shaped the competitive landscape for Chinese technology firms.

The STAR50 Index and the ChiNext Composite Index, two key Chinese technology-heavy benchmarks that serve as China's equivalents to growth-focused boards like the NASDAQ, along with the broader CSI 300 Index, have been focal points for investors tracking the trajectory of Chinese equities.

Source: Economic Times Markets