Chinese mainland markets ended higher Friday to wrap up a volatile week, with investors questioning whether the future earnings of AI and technology companies justify their rising share prices, said Timothy Pope, a market analyst for China Global Television Network (CGTN).
The benchmark Shanghai Composite Index ended up 0.04 percent at 3,905.20 points. The Shenzhen Component Index closed 0.87 percent higher at 14,094.17 points.
The ChiNext Index, tracking China's Nasdaq-style board of growth stocks, gained 1.43 percent to close at 3,545.58, while the STAR Composite Index, which tracks stocks on China's sci-tech innovation board, closed 0.05 percent lower at 1,956.85 points.
"The Chinese mainland markets are defined by that volatility at the moment as well as aggressive sector rotations. Today the energy was back in tech, AI and growth stocks, so the broader Shanghai Composite Index essentially went nowhere. There was tech, energy and biotech pulling upwards and consumer, real estate and utilities pulling downwards. The Shenzhen Component was up 0.9 percent and the ChiNext board added 1.4 percent, and that tells us that investors are getting back into tech and AI stocks after Wednesday's epic plunge. And this has really been the theme for the markets lately. I think a good way of describing it is that investors are behaving a bit like they're trying to get into a hot bath. It's not long before they can't stand the heat and they have to jump out, then after a minute they jump right back in again. And the bath in this case is exposure to highly crowded AI and technology stocks with growing valuation questions. And this is the same basic question now that is been asked previously in the U.S.: 'Are future earnings actually going to justify these prices?'" said Pope.
"A great case study this week actually was the Unitree IPO. I initially thought the company had picked a great day to debut, coinciding with the opening of the World Robot Conference in Beijing. But it actually turned out to be the worst possible day this week. Investors were leaping out of the bath on that day. Even so, its stock surged and closed 460 percent higher. And at one point on its first trading day, it was trading at 857 times projected 2026 earnings. That is a really extreme example, but it really isn't alone. CXMT is trading at nearly 130 times earnings today, with only a really small proportion of its shares actually available to trade. And when you start seeing that sort of thing, it's no wonder the water starts feeling a little bit hot," he said.
Beyond tech stocks, Pope said biotech and food security stocks were gaining traction as extreme weather across the globe brought these sectors in to focus.
"This week we also saw investors piling into some other favorites - biotech and food security stocks among them. Food security is currently another reporting obsession of mine, and these concerns about extreme weather, geopolitical disruption and China's push for greater food self-sufficiency have really gained quite a bit of traction with investors as well," said Pope.
Chinese stock markets end volatile week on a high as investors question valuation of AI, tech firms: analyst
