Mainland Chinese stocks moved close to bear-market territory on Oct. 22, when the CSI 300 briefly fell 1.7% and reached a 20% decline from its June high. Optimism around artificial intelligence and policy support has faded, while limited progress on fiscal stimulus and disappointing corporate earnings have further weakened investor risk appetite.
CSI 300 reaches the 20% pullback threshold
The latest decline brought the CSI 300 to the 20% retreat commonly used to define a bear market. Investors are reassessing Chinese equities’ valuations and earnings prospects, with expectations for additional fiscal support still lacking a strong policy signal.
Chinese companies listed in Hong Kong also came under pressure. A related index briefly fell 3%, suggesting that selling was not confined to mainland A-shares. Hong Kong’s market, which attracts broad participation from overseas investors, reflected growing concern over corporate growth prospects and the effectiveness of policy measures.
AI-linked optical names lead declines
The retreat in the AI trade weighed heavily on some technology stocks. Optical module makers Eoptolink and Innolight were among the biggest decliners. Their shares had previously benefited from expectations for investment in AI infrastructure and rising related demand.
As investors focus more closely on whether earnings can support earlier valuations and growth expectations, AI-related stocks face greater repricing pressure. The decline reflects not only a shift in daily market sentiment but also renewed scrutiny of companies’ ability to deliver on earnings expectations.
Stimulus and earnings remain key concerns
The broader market downturn comes as investors wait for fiscal stimulus substantial enough to change expectations. At the same time, earnings from some companies have fallen short of what the market had anticipated, cooling both policy and profit expectations.
Together, those concerns have weakened two of the main arguments supporting Chinese equities: whether policy can lift demand and corporate revenue, and whether strong growth can justify high valuations in popular sectors such as AI. With the CSI 300 down 20% from its peak, attention is turning back to earnings, the delivery of policy measures and investors’ appetite for risk assets.