China’s CSI 300 Enters Bear Market After 10 Weekly Declines

China’s CSI 300 fell 20% from its June peak to enter bear-market territory Thursday, Oct. 22, extending a decline that has lasted 10 consecutive weeks as slowing profit growth and weak demand weigh on Chinese equities.

The benchmark covers 300 major stocks listed in Shanghai and Shenzhen. It was down 2.6% for the week as of Thursday, Oct. 22, and more than 1% on the day.

September industrial-profit growth was the weakest recorded this year. Second-quarter economic growth was also the slowest in more than three years, as a prolonged property slowdown and continued weakness in consumer demand added pressure.

Intense competition has squeezed company margins as profit growth slows. Excess capacity and overinvestment have created structural challenges for Chinese businesses, including companies in the battery industry.

Retail traders account for about 90% of China's daily market activity, compared with roughly 20% to 25% on the New York Stock Exchange. Shaun Rein, managing director at China Market Research Group, said the retail-heavy market may see greater volatility during uncertainty because individual investors may exit faster.

Rein cited geopolitical uncertainty, concerns about an artificial intelligence bubble and deteriorating consumer confidence as risks to sentiment. He called the sell-off excessive, pointing to resilient exports and signs of recovering property prices in China’s largest cities. “It’s a crisis of confidence right now not a crisis in the economy,” he said.

Rein said investors have increasingly favored time deposits as they seek to preserve wealth amid a weak property market and sluggish labor conditions.