China blue-chip index confirms bear market as AI stocks slump

China's blue-chip index crumbled to a 15-month low and confirmed a bear market on Thursday, as AI shares slumped on fears that growth and valuations were unsustainable.

The CSI300 Index dropped 1.8% to close at 4,036.30, its lowest level since July 2025. It is now 20.2% below its most recent closing peak on June 22, crossing the 20% threshold that typically defines a bear market.

Based on closing levels, the index has never surpassed the peak it set in 2007, with the momentum that drove the market to a five-year high in June having since reversed sharply.


"The market is in the dump," said Hao Hong, managing partner and chief investment officer at Lotus Asset Management in Hong Kong.

The Shanghai Composite Index closed down 1.5%, also its lowest in more than a year.

A sweeping selloff in tech leaders across Asia, along with tepid stimulus expectations and a lack of fresh catalysts, triggered a broad rush to sell in China.

Only the consumer staples and utilities sub-indexes eked out gains.

"The National Team has been rather hesitant to make a move," Hong added, referring to China's state-owned investment funds that often intervene during selloffs.

The CSI Semiconductor Index lost 3.6% and the CSI AI Index was down 3.3%. The start-up board ChiNext Composite Index tumbled 4.4% to its lowest since July 2025.

Market sentiment has also been hurt by disappointment over Beijing's piecemeal stimulus measures, traders and analysts said, while stronger-than-expected third-quarter economic growth has further reduced expectations for additional policy support.

China's economic growth bounced off three-year lows as exports offset consumers' tight grip on their wallets, even as growing reliance on external drivers deepens structural imbalances.

Hong Kong weighed by tax overhang

In Hong Kong, the Hang Seng Index slipped 3% to a four-month low, while the Hang Seng Tech Index slid 5% to a two-year low.

Some investors pointed to Beijing's campaign to chase income tax on offshore trusts, a popular structure adopted by many ​Hong Kong-listed Chinese companies' shareholders, as another source of selling pressure.

"It's the deadline to report how much tax they owe... Today is the last day they can file," said Lotus' Hong.

Founders of Chinese companies like Haidilao were responsible for the selloff over the past few weeks, he said. "It's obvious they were selling off assets to raise cash to pay their tax liabilities."

Among the biggest losers on Thursday, Tencent slumped 2.9% and Alibaba dived more than 6%.

"Such a sharp and rapid decline is very rare, especially for a market leader like Tencent. This is likely the last of the panic selling, with the market selloff nearing its end," said Zeng Wenkai, chief investment officer at Hong Kong-based Shengqi Capital.

"However, such painful wounds will take time to heal."