Down 20% from peak, China's stock market enters bear territory
What's the story
China's mainland-listed shares have entered a technical bear market, with the CSI 300 Index plunging nearly 20% from its June peak. The decline is driven by fading hopes for major stimulus measures, disappointing corporate earnings, and concerns over the global artificial intelligence (AI) trade. Despite government efforts to stabilize the market, investor sentiment remains subdued.
Market performance
CSI 300 Index on a downward trend for 10 weeks
The CSI 300 Index, which tracks the top 300 stocks on Shanghai and Shenzhen exchanges, has been on a downward trend for 10 weeks. It has fallen by as much as 2.6% this week alone.
Jordan Cvetanovski, Chairman and CIO at Pella Funds, highlighted that China's equity market is still facing structural issues due to years of overcapacity and overinvestment.
Economic hurdles
Slowing profit growth and economic challenges
Chinese firms are grappling with slowing profit growth amid fierce competition, which has even prompted government intervention.
In September, the country recorded its weakest industrial profit growth this year.
The world's second-largest economy also witnessed its slowest growth in over three years in Q2, owing to a multi-year property sector slump and persistent consumer demand weakness.
Market analysis
Global selloff in AI-linked names impacts market
The CSI 300 Index has fallen by as much as 1.6% on Thursday alone, taking its total losses from a June peak to around 20%.
A benchmark for major Chinese companies listed in Hong Kong also fell by up to 2.9%.
The decline is attributed to a global selloff in AI-linked names and new evidence of a prolonged consumption slump.
Recovery attempts
Incremental stimulus measures expected
Despite the grim market conditions, China's growth beat in Q3 kept expansion within the government's annual target.
This gives policymakers room to stick with targeted and incremental stimulus measures.
However, analysts have warned that state-backed buying alone may not be enough for a sustained recovery in the equity market.