China's securities regulator has reportedly paused initial public offerings, while large sales by existing shareholders have also been temporarily suspended until markets recover, as Asian markets retreat amid investor doubts over the AI boom.
The China Securities Regulatory Commission has held meetings with investment banks over the last few days about holding fire on listings, according to reports in the Financial Times. The move follows the worst performing month for mainland China's benchmark index in over a decade: the CSI 300 index fell 8.5 per cent in October, taking its losses for the year to 15 per cent. Hong Kong's Hang Seng has tumbled 10.6 per cent since January, while the Shanghai Composite has lost 10.3 per cent. During Tuesday's session, the CSI 300 shed a further 0.2 per cent.
Chinese equities have been caught in a prolonged downturn since the summer as investors' scepticism over the AI boom gained speed. Unitree Robotics, a blockbuster summer listing, has seen its share price plummet over 26 per cent since its market debut, while AI firm MetaX's share price has tumbled 31.4 per cent and transceiver supplier Eoptolink's has fallen 43.1 per cent.
Other exchanges in the region have used similar methods. South Korea's blue-chip index has triggered 55 trading halts this year to date, temporarily cutting off investor access during volatile periods, and the Tokyo Stock Exchange has also green-lit trading halts over the course of the year.
"While the measures may help shore up sentiment in the short term, they don't tackle the deeper concerns about the economic outlook or whether the huge sums being poured into AI will generate the returns investors are banking on," said Susannah Streeter, chief investment strategist at Wealth Club. "Trying to calm nerves by artificially restricting the supply of shares may buy some time, but it's unlikely to persuade investors that the worst of the sell-off is over."
China's AI woes have been felt across the region. South Korea's blue-chip index fell 3.5 per cent, giving back all of Monday's gains, led by tech heavyweights Samsung Electronics and SK Hynix, which lost 4.1 per cent and 1.1 per cent respectively.
Wall Street's Monday rally was reversed after Apple's earnings, in which the company warned investors that higher prices will eat into profit margins. The Nasdaq Composite closed down 1.4 per cent and the S&P 500 fell 0.5 per cent. "Pretty much anything tech-momentum-AI related remains under pressure with an abortive attempt at a rally yesterday on Wall Street, a signal that buyers are not rushing to buy the dip just yet," said Neil Wilson, investor strategist at Saxo.
The index had recovered slightly at market open, rising 2.2 per cent, but analysts are awaiting the fallout of Tuesday's US midterms. Abbas Owainati, Head of Portfolio Management and Asset Allocation at Raymond James, said: "There's a bit of a 'have your cake and eat it' dilemma. We're seeing concern on both sides around the rapid build-out of data centres, including electricity costs, water use and pressure on local infrastructure. But there is also support across the political divide for maintaining US leadership in AI, particularly given the strategic competition with China."
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Year-to-date losses for major Chinese indices
percent
Source: City AM
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Analysis
Why This Matters
The pause on listings and shareholder sales cuts off a key exit route for investors and companies in China, at a time when markets are already deeply negative for the year.
The regional sell-off reflects a broader reassessment of whether heavy investment in AI will deliver the returns markets have priced in, a question that affects global technology investors.
Wall Street's reaction to Apple's earnings and the US midterms could set the direction for AI-related stocks worldwide in the coming days.
Background
After a long AI-driven rally in equities, markets have turned volatile as investors question the scale of spending on data centres and AI infrastructure. China's benchmark index has been in a prolonged downturn since the summer, and recent tech listings that soared at debut have since lost large portions of their value. Several Asian exchanges have resorted to trading halts to dampen sharp swings.
Key Perspectives
Susannah Streeter, chief investment strategist at Wealth Club: says the measures may shore up sentiment in the short term but do not tackle deeper concerns about the economic outlook or whether huge sums poured into AI will generate the returns investors expect, and that restricting share supply is unlikely to convince investors the worst of the sell-off is over.
Neil Wilson, investor strategist at Saxo: says anything tech-momentum-AI related remains under pressure, and the failed Wall Street rally shows buyers are not rushing to buy the dip.
Abbas Owainati, Raymond James: says there is concern across the political divide about the rapid build-out of data centres, including electricity costs, water use and pressure on local infrastructure, while there is also bipartisan support for maintaining US leadership in AI given strategic competition with China.
What to Watch
The outcome of the US midterms and whether Democratic performance weighs on AI stocks as analysts anticipate.
Whether China's measures stabilise the CSI 300 and other regional benchmarks or merely delay further declines.
How upcoming tech earnings, especially around AI spending and margins, affect investor confidence in the sector.
12 claims in this story checked against 1 source: 12 supported.
Show each claim
SupportedChina has reportedly paused IPOs as Asian markets retreat under AI-related concerns.City AM: “China halts IPOs as Asian markets continue to retreat under AI woes. China’s securities regulator has reportedly paused listings in another blow to the region, as it struggles to recover from investors’ AI fears.”
SupportedLarge sales by existing shareholders have been temporarily suspended until markets recover.City AM: “Large sales by existing shareholders have also been temporarily suspended until markets have recovered.”
SupportedThe CSRC met investment banks over the last few days about holding fire on IPOs, according to the Financial Times.City AM: “The China Securities Regulatory Commission has held meetings with investment banks over the last few days about holding fire on initial public offerings, according to reports in the Financial Times.”
SupportedSusannah Streeter said the measures may help short-term sentiment but do not address deeper economic and AI-return concerns.City AM: ““While the measures may help shore up sentiment in the short term, they don’t tackle the deeper concerns about the economic outlook or whether the huge sums being poured into AI will generate the returns investors are banking on,” said Susannah Streeter, chief investment strategist at Wealth Club.”
SupportedStreeter said restricting the supply of shares may buy time but is unlikely to persuade investors the sell-off is over.City AM: ““Trying to calm nerves by artificially restricting the supply of shares may buy some time, but it’s unlikely to persuade investors that the worst of the sell-off is over.’’”
SupportedNeil Wilson said tech, momentum and AI-related assets remained under pressure and buyers were not rushing to buy the dip.City AM: ““Pretty much anything tech-momentum-AI related remains under pressure with an abortive attempt at a rally yesterday on Wall Street, a signal that buyers are not rushing to buy the dip just yet,” said Neil Wilson, investor strategist at Saxo.”
SupportedAbbas Owainati described a “have your cake and eat it” dilemma.City AM: “Abbas Owainati, Head of Portfolio Management and Asset Allocation at Raymond James, said: “There’s a bit of a ‘have your cake and eat it’ dilemma.”
SupportedOctober was the worst-performing month for mainland China’s benchmark index in over a decade.City AM: “The decision comes in the wake of the worst performing month for mainland China’s benchmark index in over a decade.”
SupportedThe CSI 300 fell 8.5% in October, leaving its losses for the year at 15%.City AM: “The CSI 300 index fell 8.5 per cent in October, taking losses for the year to 15 per cent.”
SupportedHong Kong’s Hang Seng has fallen 10.6% since January.City AM: “Meanwhile , Hong Kong’s Hang Seng has tumbled 10.6 per cent since January”
SupportedThe Shanghai Composite has fallen 10.3%.City AM: “while the Shanghai Composite has lost 10.3 per cent.”
SupportedThe CSI 300 fell a further 0.2% during Tuesday’s session.City AM: “During Tuesday’s session, the CSI 300 index lost a further 0.2 per cent.”
