A selloff in Chinese stocks intensified on Friday, deepening investor anxiety following disappointing tech earnings and mounting concerns over Donald Trump’s potential return to power. The mainland’s CSI 300 Index plunged 3.1%, marking its steepest decline since October 9. In Hong Kong, the Hang Seng China Enterprises Index fell by as much as 2.6%, extending a second consecutive week of losses. A key index tracking Chinese tech stocks in Hong Kong is now approaching a technical bear market.
The ongoing market downturn highlights growing frustrations over the slow pace of fiscal stimulus from Beijing and rising fears of an escalation in US-China tensions. Disappointing earnings from major Chinese tech firms, including PDD Holdings Inc. and Baidu Inc., further dampened market sentiment. Baidu’s shares briefly dropped 10% after reporting a significant revenue decline.
“Investors are seeing little improvement across various sectors, from property to consumption, and corporate earnings have offered no positive surprises,” said Steven Leung, executive director at UOB Kay Hian Hong Kong.
Chinese tech earnings had been expected to provide reassurance about the economy’s trajectory, but instead, they revealed weak consumer spending. Baidu, for example, reported its largest revenue drop in over two years, while PDD warned of declining profitability due to increased competition in China’s domestic market.
The Hang Seng Tech Index fell by as much as 3% on Friday, bringing its decline since October to more than 20%.
The market has struggled to maintain momentum after a strong rally in late September, driven by expectations of monetary easing. Analysts from Wall Street firms such as Morgan Stanley and CLSA have recently downgraded their outlook on Chinese stocks. Some, however, see the selloff as an opportunity to add positions, speculating that Beijing has sufficient policy tools to address potential US tariff increases under Trump.
While some signs of stabilization have emerged—October retail sales exceeded expectations, and industrial production, though slowing, remains strong enough to support the government’s 2024 growth target of around 5%—uncertainty remains high, suggesting increased volatility heading into 2025.
“The broader market still faces macroeconomic uncertainties, as October’s better numbers were partly driven by early Singles’ Day promotions and timing around property policy easing. There are questions about the sustainability of this growth,” said Xin-Yao Ng, investment manager at abrdn Plc. “As for tariffs, Trump is likely to negotiate with various governments, but his appointments, many of whom are China hawks, may not bode well for trade relations.”
Since its October peak, the Hang Seng China Index has lost 17%, and the CSI 300 Index has dropped more than 9%.
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