Mainland stocks weakened to their lowest levels in six weeks on Monday, dragged down by the tech sector, after lukewarm factory data added to concerns about slowing growth momentum.

In Hong Kong, the benchmark Hang Seng Index rose 215 points, or 0.9 percent, to 25,398 on turnover of HK$330.94 billion.

The China enterprises index was 82 points, or one percent, up at 8,507 while the tech index was 80 points, or 1.7 percent, up at 4,964.

Up north, the Shanghai Composite Index closed down 10 points, or nearly 0.3 percent, at 4,057 on turnover of 1.32 trillion yuan.

The Shenzhen Component Index fell 234 points, or 1.5 percent, to 15,340 on turnover of 1.56 trillion yuan while the ChiNext was 87 points, or 2.15 percent, lower at 3,950 on turnover of 728.5 billion yuan.

Tech sectors led the decline, with the CSI AI Index down 2.5 percent and the CSI Semiconductor Index dropping 5.8 percent to a two-week low.

The Star 50 Index slipped five percent to a three-week low.

Wu Zhou, fund manager at Shenzhen Deyuan Investment, attributed the tech stock dropoff to the sector's outsized gains, overcrowded trades and news that state semiconductor funds were reducing their stakes.

"The biggest negative is simply that prices have risen too much," Wu said.

"Positions are heavily concentrated in chipmaking and AI, and any signs of selling would trigger a stampede," he said, estimating that the top five percent most-traded stocks account for nearly 50 percent of total market turnover.

China's factory activity stalled in May as new export orders contracted and input costs kept rising, an official survey showed on Sunday.

A private survey on Monday showed the manufacturing sector expanded at a slower pace last month.

Lukewarm economic readings did little to lift sentiment, with investors potentially taking profits from tech after a recent rally and squaring positions ahead of some highly anticipated chip IPOs like ChangXin Memory Technologies, said Kenny Ng, securities strategist at Everbright Securities International.

Elsewhere, China's planned rebalancing of indexes is expected to trigger an estimated US$48 billion in two-way passive investment flows, according to Goldman Sachs, as major indexes undergo semi-annual adjustments later this month.

In Tokyo, the Nikkei share average topped 67,000 for the first time on Monday before ending the day up 604 points, or 0.9 percent, at 66,934, powered by AI-related stocks as startup investor SoftBank Group overtook Toyota Motor to become the country's most valuable company.

In Seoul, the Kospi ended up 312 points, or 3.68 percent, at 8,788, its highest closing level on record, as chipmakers and other technology firms rallied on surging exports and optimism around AI cooperation with Nvidia. (Reuters/Xinhua)


Edited by Tony Sabine