Shanghai Stocks Slide Toward Yearly Lows as China Tech Sell-Off Deepens and Hopes for Fresh Stimulus Fade

Chinese stocks fell for a second straight session on Thursday, pushing the Shanghai benchmark closer to its lowest levels of the year as a sell-off in technology shares deepened and investors grew increasingly doubtful that Beijing will roll out major new economic stimulus.

The Shanghai Composite Index closed down 55 points, or 1.48%, at 3,658.03. Losses were steeper on the Shenzhen market and among growth stocks, with the start-up focused ChiNext index falling more than 2.5%.

The decline was broad. More than 4,300 stocks fell across China's markets, highlighting widespread selling rather than weakness limited to a few sectors.

Near bear market territory

The CSI 300 index of leading Shanghai and Shenzhen stocks has fallen about 20% from its June peak, putting it near the threshold for a technical bear market.

The blue-chip index hit its lowest level in 14 months on Wednesday, weighed by a sharp drop in battery maker Contemporary Amperex Technology, or CATL, after the company reported weaker profit growth. CATL is one of the heaviest-weighted stocks in Chinese indexes, and its slide has dragged on the broader market.

Tech stocks under pressure

Technology and internet companies led Thursday's losses as investors weighed renewed regulatory pressure and anxiety over the artificial intelligence trade.

In Hong Kong, where many major Chinese tech companies are listed, Alibaba fell about 5.5% after the government called for stronger quality control in the e-commerce sector. Other online retailers and platforms also declined, including JD.com, Meituan and Tencent.

AI-related stocks were hit especially hard. Chinese AI developers MiniMax and Z.AI fell sharply, while memory chipmaker ChangXin Memory also declined. Hong Kong's Hang Seng index dropped about 2.7%.

The selling in Chinese tech mirrored weakness across Asia, where investors pulled back from AI-related stocks on concerns that heavy spending on AI infrastructure may not generate returns quickly enough. South Korea's KOSPI fell more than 3.5%, and Japan's Nikkei 225 dropped more than 2.6%.

Stimulus hopes fade

A key factor behind the recent weakness in Chinese stocks has been fading expectations for major government stimulus.

Investors had hoped Beijing would introduce large-scale measures to boost consumer spending and support the economy. But recent economic data showing stable growth has reduced pressure on policymakers to act aggressively, leading investors to scale back those expectations.

Lackluster corporate earnings have added to the gloom, as companies report pressure from weak domestic demand and intense price competition.

Trade tensions with Europe

Fresh trade tensions with the European Union have also weighed on sentiment this week. Chinese stocks opened lower on Monday after the EU signaled it would introduce new trade safeguards, raising concerns about access to one of China's biggest export markets.

Trade frictions with Europe have intensified in recent years, particularly over Chinese electric vehicles, steel and other industrial goods. Any new restrictions could hit Chinese exporters at a time when domestic demand remains weak.

Global pressures

Global conditions offered little relief. Brent crude rose above $110 a barrel after deadly attacks in Saudi Arabia, while shipping risks in the Strait of Hormuz persisted. China is the world's largest crude oil importer, and higher energy prices raise costs for manufacturers and consumers.

Higher oil prices have also strengthened expectations that the U.S. Federal Reserve will keep interest rates elevated, which tends to weigh on emerging-market assets and draw capital toward the United States.

Futures tied to U.S. technology stocks fell in Asian trading Thursday after shares of chip equipment maker Lam Research dropped in after-hours trading on a disappointing outlook.

What's next

Investors will watch for any signals from Beijing about new policy support, particularly measures aimed at lifting household consumption. Upcoming corporate earnings from major Chinese companies will also be closely scrutinized for signs of whether demand is stabilizing.

Market watchers will also follow developments in trade talks with the EU and in the global AI trade, both of which have weighed heavily on Chinese equities this month.

With the CSI 300 hovering near bear market territory and the Shanghai Composite near its lows for the year, Thursday's decline underscores the fragile state of investor confidence in China's stock market.