China Stocks Enter Bear Market as Asian Shares Fall

Asian stock markets experienced broad selling pressure on Thursday as China's benchmark CSI 300 index officially entered a bear market after ten straight weeks of declining prices.

Data from LSEG cited by CNBC shows the CSI 300 index stood at 4,060.19 by Thursday's morning break. That places the index about 20% below its June peak and down 13.94% from its level on January 1.

Why Are Chinese Equities Slipping?

Market analysts at Bloomberg attributed the downturn to three primary factors: fading hopes for broad economic stimulus, weaker corporate earnings reports, and growing caution around the global artificial intelligence (AI) trade.

In financial terms, a market enters a bear market when a key index falls 20% or more from its recent high. Despite these drops, Chinese policymakers have offered minimal new economic support so far.

On Tuesday, China kept its key benchmark interest rates unchanged for the 17th consecutive month. The one-year loan prime rate (LPR) remained at 3.0%, while the five-year LPR stayed at 3.5%.

Analysts at Maybank noted that stable economic growth reduces the urgency for major new fiscal or monetary measures, Reuters reported. China reported third-quarter growth of 4.5%, beating economic forecasts, though stock market momentum has remained sluggish despite the data.

State Intervention and the Role of Central Huijin

Government-backed market intervention has not fully offset the market slide. Overall, state buying has been smaller than earlier state selling efforts.

Central Huijin, the sovereign entity leading market stabilization, raised $231 billion through exchange-traded fund (ETF) sales during the first half of the year.

Since resuming purchases in July, Central Huijin has reinvested about $43 billion, according to estimates by Bloomberg Intelligence analysts. That leaves approximately $188 billion in remaining available funds.

However, Bloomberg Intelligence analysts cautioned that state buying alone may not produce a lasting economic or market recovery.

Selling Pressure Spreads Across Regional Asian Exchanges

The market pressure extended well beyond mainland Chinese exchanges on Thursday morning:

• South Korea: The KOSPI index fell 2.56% by midday to 5,588.94, down from its previous close of 5,735.66.
• Japan: The Nikkei 225 traded 1.65% lower by early afternoon at 63,554.76.
• Taiwan: The TAIEX dropped 1.15% from its previous close to reach 46,346.92 by late-morning trade.
• Hong Kong: A gauge tracking major mainland Chinese companies listed in Hong Kong fell as much as 2.9% on Thursday.

Technology equities in Hong Kong suffered notable losses. The Hang Seng Tech Index hit a two-year low on Tuesday as AI hardware shares pulled back.

By Wednesday, internet leader Tencent dipped below HK$400, while battery producer CATL dropped following slower profit growth and intense sector competition.

Sovereign Wealth Funds See Long-Term Opportunities

In contrast to short-term market declines, select sovereign wealth funds have increased their long-term allocations to the region this year.

Data from Global SWF provided to CNBC reveals that sovereign wealth funds deployed $14.2 billion into mainland China and Hong Kong through September. This total is nearly triple the $4.9 billion invested by these funds across all of 2025.

Saudi Arabia's Public Investment Fund led these efforts with $6 billion in commitments, while four Gulf-based funds accounted for nearly 70% of all sovereign inflows into the region.

Key investments included buying a minority stake in coffee brand Luckin Coffee and participating in Alibaba's $10.2 billion share sale.

"Valuations are lower than they've been in years. I think this will be a really good vintage for investors in China," said Andrew Wang, head of consumer investments at Mubadala's private equity unit.

Despite this increased Middle Eastern focus, China represents a small share of total global sovereign deployment. The United States attracted $132.4 billion in sovereign investments over the same nine-month period, while Europe and the UK gathered $44.6 billion.

Macro Trends and Risk Awareness

Global asset prices and equity benchmarks remain sensitive to interest rates, economic growth trends, and international liquidity conditions. Market participants closely watch macro developments as regional fluctuations can influence overall investor sentiment across traditional and digital asset markets.

Past performance of financial markets, equities, or digital assets is not an indicator of future results. Readers should always evaluate macroeconomic risks and perform independent analysis before making investment decisions.