China: Stocks post twelve weeks of losses amid AI correction

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The CSI 300 closed Friday down about 1.4%, near its one-year low. In October, its decline reached around 8.5%, while the cumulative losses of the last twelve weeks approached 15%, according to RTHK. The series constitutes a record for this index, rather than for all Chinese markets since their opening.

Technology stocks concentrate part of the sales. Investors are wondering about the revenue that massive spending on artificial intelligence can produce. In China, the correction particularly affects semiconductors and suppliers of components for data centers.

The movement had already gained momentum before this session. On October 26, Reuters reported a drop of around 40% in the STAR 50, the Shanghai technology index, in less than four months. The CSI 300 had then lost around 20% since its June peak.

However, not all Chinese stocks follow the same path. In Hong Kong, the Hang Seng ended Friday up 1.5% and rose 0.9% for the week. This divergence shows that investors continue to select certain stocks, despite tensions on the continent.

The weakness of stocks and real estate regularly fuels questions about alternative investments for Chinese savers. However, a stock market decline does not allow us to conclude that money is heading towards bitcoin or stablecoins.

Crypto activity has not disappeared despite the restrictions. In its 2024 East Asia report, Chainalysis described the use of direct peer-to-peer trading and over-the-counter intermediaries, which organize transactions outside of public order books. The company noted in particular an increase in these circuits since mid-2023, in a context of real estate difficulties. These historical observations do not measure flows for October 2026.

The continental framework remains restrictive: the Chinese text of September 2021 notably prohibits exchange services between official currencies and cryptocurrencies, as well as services from foreign platforms to residents of the country.

Hong Kong has a separate framework, but is not open access for mainland investors. Its regulator is asking affected platforms to prevent mainland Chinese residents from accessing their crypto services.

The Chinese correction therefore poses a question of allocation of savings, without providing an automatic response favorable to Bitcoin. The flows observed towards crypto platforms and intermediaries count for more than just the number of red weeks in Shanghai. Bottom in sight or prolonged decline on the markets? To be continued on our Telegram channel.

Machine-translated from French