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China’s markets spent the day sliding toward a correction as traders dumped tech and braced for more weak data. The Hang Seng China Enterprises Index dropped 1.8%, and the MSCI China Index fell 1.6%, with both touching technical correction levels before pulling back slightly. Losses hit fast as tech names lost steam and growth fears pushed investors to cut risk.
Alibaba and Tencent dragged the hardest, and a Hong Kong tech gauge sat right on the edge of a bear market. The mood was already shaky, and this move made it worse.
Fresh numbers this week signaled another hit to economic confidence. Traders said this raised the risk of weakness spreading to other assets.
Many now worry that Beijing will keep delaying any major stimulus. That has left the world’s second-largest market dealing with soft demand, weak housing, and deflation pressure all at the same time.
Investors cut exposure as weak demand hits confidence
“Deflation, soft consumption, real estate weakness, involution — none of these issues seem to have been definitively resolved,” Vey-Sern Ling of Union Bancaire Privee said. He added that profit-taking makes sense with this kind of uncertainty.
That pretty much summed up the day. China’s earlier rally, fueled by excitement around DeepSeek, had turned local benchmarks into global outliers for a while. Now traders are rechecking everything, and stretched valuations in tech are not helping.
New data on Monday showed investment sliding again and retail sales growing at their slowest pace since Covid. Markets sold off hard on that. Housing added more problems as home prices resumed falling.
China Vanke’s deepening debt troubles added another layer to the real estate pressure. Trade tensions stayed in the background, making the macro picture even more unstable.
President Xi Jinping said he would crack down on “reckless” projects that only show surface-level results.His comments pointed to concerns about the quality of growth and how financial resources are used.
That message landed while tech stocks were already dealing with fear of an AI bubble. Xin-Yao Ng of Aberdeen Investments said the sector is reacting to “generally weak macro and lack of meaningful catalysts from the Central Economic Work Conference.”
Traders rotate out of tech as policy hopes fade
With the rally cooling, money began shifting away from high-priced tech names. Investors moved into areas that might gain from Beijing’s push to support domestic demand. That rotation helped onshore stocks hold up better. The CSI 300 lost 2.8% over the past month, while the HSCEI fell 6.8%.
The MSCI China gauge trades at roughly 12 times forward earnings, higher than its five-year average of 11. Some big global managers, including Amundi and Fidelity International, said China could still see gains next year thanks to its AI strength and its ability to stay steady during US tensions.
The MSCI China Index is still up almost 27% this year, beating regional peers and nearly doubling the S&P 500’s climb.
Even so, profit-taking hit popular names like Pop Mart, adding more pressure to domestic markets.
Marvin Chen of Bloomberg Intelligence said, “China stocks have lost momentum in the fourth quarter due to a lack of catalysts and underwhelming signals on policy support.”
He added that the market may keep taking cues from global sentiment until early next year, when key policy meetings begin.
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