New Delhi: China’s stock market has slipped into bear-market territory as investor enthusiasm over artificial intelligence (AI) and technology-led growth gives way to concerns about company valuations, consumer demand and the country’s economic recovery.
The CSI 300 Index, which tracks 300 major companies listed in Shanghai and Shenzhen, fell as much as 1.6 per cent on Thursday. The decline extended its fall from the June peak to nearly 20 per cent, according to a report by Bangladesh-based English-language newspaper The Daily Sun.
A market is generally considered to be in bear-market territory when a major index falls 20 per cent or more from a recent high.
Selling pressure has also spread to Hong Kong-listed Chinese stocks. A key equities gauge there dropped as much as 2.9 per cent as investors reassessed the outlook for China’s economy and technology sector.
AI Optimism Gives Way to Valuation Concerns
The downturn marks a shift in investor sentiment after a strong rally in Chinese technology stocks earlier this year. Expectations that advances in AI and Beijing’s push to strengthen the country’s technological capabilities would support long-term growth had helped lift shares.
Investors are now paying closer attention to corporate earnings, valuations and the returns companies can generate from their AI-related investments.
In several parts of the technology sector, expectations surrounding the AI boom have run ahead of profitability. This has made investors more cautious about whether heavy investments in the technology will translate into sustainable earnings.
A broader global pullback in AI-linked stocks has added to the pressure on Chinese equities.
Weak Consumer Demand Weighs on Market Sentiment
Concerns about China’s domestic economy have also contributed to the market decline. Although the country’s third-quarter economic growth exceeded expectations and kept Beijing on track to meet its annual growth target, investors remain uncertain about the strength of the recovery.
Weak household consumption continues to be a major concern. It has raised questions about demand across retail, internet businesses and other industries that depend on consumer spending.
Investors are looking for clearer signs that business conditions are improving, corporate profits are growing and households are becoming more confident about spending.
A prolonged market downturn could also create challenges for Chinese technology companies. Many rely on capital markets to fund expansion, develop new products and invest in innovation.
The combination of fading AI optimism, questions over valuations and an uncertain domestic recovery has put China’s equities under renewed pressure.