Global Markets
China's CSI 300 slides deeper into a bear market despite heavy trading in state-linked ETFs
The blue-chip index extended Thursday's 20% drawdown on Friday morning as AI-linked shares led losses and hopes for fresh stimulus faded.
HedgeWeekly News Desk ·
China's CSI 300 index sank further into bear-market territory on Friday morning. The blue-chip gauge was down 1.7% at 3,964.48 at 10:15 a.m. local time, IndexBox reported, citing the South China Morning Post, leaving it on course for its weakest close since July 2025. Technology names led the decline, with the Star Market 50 off 3.6% and the ChiNext 50 down 3.1%.
The drop builds on Thursday's 1.8% fall, which left the CSI 300 at 4,036.30, 20.2% below its June 22 closing peak and past the 20% mark usually used to define a bear market, Reuters reported. The Shanghai Composite ended Thursday at its lowest in more than a year, the CSI Semiconductor and CSI AI indexes lost 3.6% and 3.3%, and Hong Kong's Hang Seng Tech Index fell 5% to a two-year low.
Selling has continued even as state-linked funds appear to be active. Trading in nine ETFs associated with state-backed investors reached 52 billion yuan by 2:45 p.m. on Thursday, the highest since October 15, according to Bloomberg, though turnover alone does not show how much was net buying. Lotus Asset Management chief investment officer Hao Hong told Reuters that the so-called National Team had been hesitant to step in. Investors cited the global retreat from AI trades, disappointment with piecemeal stimulus after stronger-than-expected third-quarter growth, and, for some, Beijing's push to collect income tax on offshore trusts used by holders of Hong Kong-listed Chinese companies.
Why it matters: Bloomberg estimates about $2.4 trillion has been wiped from mainland share values since their May peak, and the Hang Seng Tech Index is down 31% this year, close to erasing its gains since Beijing's September 2024 stimulus. Margin debt has fallen back to late-2025 levels and daily turnover is near a 15-month low, signs that leveraged retail money is retreating. Bloomberg Intelligence's Rebecca Sin said state-backed investors may need to buy more, for longer, than after the April 2025 and July 2026 selloffs; in 2024, ETF buying steadied the market but a lasting recovery came only with broad policy announcements in September. For funds with China exposure, the signals to watch are the scale of state ETF purchases and whether Beijing moves beyond targeted support.
Sources
- Reuters via Business Recorder: China blue-chip index confirms bear market as AI stocks slump
- IndexBox: CSI 300 falls 1.7% as China stocks extend bear-market sell-off
- Bloomberg via Macau Daily Times: China's stock rally unravels as $2.4 trillion disappears
- Reuters via Business Recorder: Asian shares wobble as tech rout boosts bonds
- Finimize: China stocks slide again as global risk-off takes hold