SHANGHAI: China’s stock gauge dipped on Wednesday despite an unexpected rebound in manufacturing activity, even as the market was set to log its best annual performance in six years on an artificial intelligence-fuelled rally. Hong Kong share index also fell in a shortened trading session, but logged its best year since 2017. China’s blue-chip CSI300 Index fell 0.4% by the lunch break, while the Shanghai Composite Index edged 0.1% lower. For the year, both gauges jumped about 18%, and Shanghai stocks are set to register their biggest percentage gain since 2019. Hong Kong’s Hang Seng lost 0.9%. For the year, the benchmark surged 28%, the best performance in eight years. The market is closed for the afternoon session. China markets have weathered a Sino-US trade war and rising geopolitical tensions in a volatile year, with share prices supported by government stimulus, rising confidence in Chinese technology, and an appreciating yuan. China’s yuan breached the psychologically important 7-per-dollar level for the first time in 2-1/2 years this week, and is on track for its biggest annual rise since 2020. Western Securities expects the market’s upward trend to continue in 2026, underpinned by the appreciating Chinese currency. “Yuan appreciation is driving offshore capital flow back to China, solidifying the foundation of China’s bull market,” the brokerage said. Guotai Haitong Securities also said in a report that a steadily rising yuan will “provide favourable conditions for loose monetary policies in early 2026,” and expected investor risk appetite to increase. On Wednesday, traders heading into New Year’s Eve ignored news that China’s manufacturing activity unexpectedly grew in December, snapping eight straight months of decline. Bohai Securities pointed out that signs are emerging that China’s factory gate prices are starting to rise, benefiting corporate profits and will lend support to the stock market next year. In China, defense and navigation satellite jumped on Wednesday but consumer electronics and chipmaking stocks fell. In Hong Kong, most sectors dropped on Wednesday, with drugmakers and tech stocks among the biggest decliners.‑Reuters