China and Hong Kong stocks remained largely steady on Tuesday, as gains in rare earth and defence shares balanced losses in technology and artificial intelligence sectors.
China’s blue-chip CSI300 Index edged up 0.1% by midday, while the Shanghai Composite Index gained 0.4%. In Hong Kong, the Hang Seng Index rose 0.1%.
However, the Hang Seng Tech Index fell as much as 3%, reaching its lowest level since July 15, 2025. The decline followed announcements from Chinese telecom companies on value-added tax adjustments, which raised concerns about potential broader tax hikes across the technology sector.
Shares of Tencent dropped as much as 6%, hitting their weakest point since early August last year before partially recovering.
On the upside, defence CSI399973 and rare earth CSI930598 shares led onshore gains, rising 3.8% and 2.8% respectively, while AI stocks CSI930713 fell 1%. Non-ferrous metal shares stabilised after recent sharp losses, and in Hong Kong, material stocks HSCIM advanced 1.6%.
Investors in China appear confident in a stable macroeconomic backdrop, with signs pointing to a gradual recovery, according to UBS analysts. They noted that market dynamics are shifting from being driven by liquidity and themes to focusing on earnings and leading companies.
“A key focus will be on verifying the recovery in the producer price index (PPI) and corporate profits, as these will determine whether the market can transition from valuation rerating to earnings-driven growth,” the analysts added.
In Hong Kong trading, Eastroc Beverage (9980.HK) debuted flat after raising HK$10.14 billion ($1.3 billion) through a share sale, marking a significant entry for the Chinese energy drinks producer.
The session highlights the China Hong Kong stocks market’s current balance between sector-specific volatility and broader economic optimism, suggesting investors remain cautious but attentive to emerging earnings trends.