China stocks fall as tech shares slide despite Fed rate hold

Chinese stocks fell on Thursday, October 29, as a technology selloff in mainland markets outweighed the backdrop of the US Federal Reserve’s decision to hold interest rates steady, Reuters reported. At the midday break, the Shanghai Composite was down 0.9% and the CSI300, an index of large companies, had lost 1.2%.

The sharper losses were concentrated in technology shares: the ChiNext Composite, which tracks the startup board, fell 3.6%, while Shanghai’s tech-focused STAR50 dropped 4.2%. A gauge of 5G communications companies slid 6.1% in morning trading, according to Reuters. Those moves put the sector’s losses well beyond the broader market decline.

Unitree earnings and AI share valuations

James Wang, head of China strategy at UBS Investment Bank Research, said valuations for technology and AI hardware shares were near historical lows and implied a substantial slowdown in earnings-per-share growth. He described investor sentiment on AI as fragile, but said the balance of potential risk and reward looked more attractive and interest could return toward the end of the year as investors rebuilt portfolios.

Elsewhere in Asia, shares gave up earlier gains as AI-related earnings announcements drew mixed reactions, Reuters reported. Results from Amazon and Intel were due later on October 29, leaving further company updates in focus for investors following the sector’s moves.

What the Federal Reserve decided

The Fed left US interest rates unchanged on Wednesday, October 28, while awaiting more inflation data. The Guardian reported that two of the 12 officials who voted preferred a quarter-point increase. The pause followed a rate rise the previous month that had brought the Fed’s benchmark range to 3.75% to 4%.

US annual inflation reached 3.7% in September, up from 3.4% in August and above the Fed’s 2% target, according to The Guardian. Fed chair Kevin Warsh said politics played no role in the decision before the following week’s US midterm elections. He said incoming information would help officials decide where policy should go next.

In Hong Kong, the Hang Seng index edged up 0.1% even as the city’s technology shares fell 2%, Reuters reported. That split, like the steeper losses in mainland technology indexes, showed how uneven the region’s market response was during the reported session.