Oct 26 (Reuters) – While global tech stocks teeter, in China they have already crashed as lofty valuations collapse under worries about AI demand and curbs on Chinese exports.
The meltdown, tanking the mainland STAR50 index of AI and semiconductor leaders by 40% in less than four months and vaporising some $480 billion in market value, is an ill omen for wobbly world markets and a dampener on China’s efforts at encouraging its savers into stocks to fund the AI boom.
It has also slammed the brakes on a rally running two years, since economic stimulus promises sent shares soaring, and has stalled Beijing’s push to break with a long boom-bust pattern and drive a “slow bull” market that delivers reliable performance. China’s broad blue-chip index has dropped about 20% from highs made in June.
“The stock market later evolved into a speculative crazy bull,” said Beijing-based fund manager Dong Baozhen. “And now we see the bubble bursting.”
The reversal reflects a rally that ran to higher heights than markets in the West or elsewhere in Asia, and compares with a mere prick to US AI stocks, which have led a 6% drawdown in the Nasdaq from a record high scaled three weeks ago.
There has been no obvious selling trigger in China, although traders said high prices, tax bills and the threat of the US or other nations banning Chinese equipment in data centres all contributed.
With AI stocks running to 42% of China’s market capitalisation and 57% of turnover across mainland-listed A-shares and Hong Kong’s H-shares, according to Goldman Sachs, few in a market dominated by small investors have escaped pain.
RETAIL FAVOURITES SLIDE
Shares in robot-maker Unitree, 8,000 times oversubscribed by retail buyers at listing, have halved since they started trading in August, and chipmaker CXMT has lost more than a quarter of its value in the past month.
Chipmakers MetaX Integrated Circuits and Moore Threads Technology, which leapt 700% and 400% respectively on their market debuts last year, have also halved in value since July.
Chen Wensheng, a small business owner and investor from China’s southern Hainan, said he bought into the rally emboldened by what he felt was official support for the likes of Unitree, which counted state-backed funds as investors. But Chen and his friends are now nursing losses.
Frustration that an investment theme backed by Beijing has ended so badly has driven many investors into defensive assets and is likely to slow equity fundraising by tech firms.
Shares in optical parts makers Zhongji Innolight and Eoptolink Technology are down roughly 60% from highs in June and July, in part as Washington moves towards banning the one-time darlings from supplying US data centres.
Source: finance.yahoo.com
