Chinese stocks fell sharply on Friday, extending a week-long decline that put major indexes on track for their worst performance since late December 2024. Technology shares led the slump, mirroring overnight weakness on Wall Street and reflecting growing investor caution as the year draws to a close.
The Shanghai Composite Index dropped as much as 2.3% to its lowest level since October 17 before trimming losses to close the morning session down 1.9%. The blue-chip CSI 300 Index also lost 1.9%, leaving both benchmarks roughly 3.3% lower for the week—their biggest weekly fall in nearly 11 months.
Tech Shares Lead Market Declines
Losses were widespread across sectors, with technology stocks bearing the brunt. The CSI Artificial Intelligence Index slumped 3.5%, while the CSI Semiconductor Index shed 3.1%. Defensive sectors also struggled: the banking gauge slipped 1%, the liquor sector fell 0.8%, and consumer staples declined 0.5%.
In Hong Kong, the Hang Seng Index dropped 2.1% to a five-week low, and the Hang Seng Tech Index tumbled 3.1% to its weakest level in three months.
Analysts attributed the sell-off to weaker risk appetite and disappointing economic data. “Market sentiment weakened toward year-end on lower risk appetite and recent muted economic data,” Morgan Stanley said in a note.
Outlook Hinges on Economic Policy Meeting
Analysts at Citi said investors would be watching for signals from China’s Central Economic Work Conference (CEWC) in mid-December, which typically outlines the country’s key policy priorities for the following year.
Despite the losses, some strategists remained cautiously optimistic. UBS analysts noted that while global tech stocks have been under pressure, the impact on Asian markets has been limited so far. “If the liquidity-driven U.S. sell-off persists long enough to deflate the AI bubble healthily, it could benefit emerging markets, particularly China,” UBS said.
With year-end trading sentiment subdued and earnings growth expected to remain moderate, analysts anticipate only limited upside in the near term. For now, investors appear to be bracing for further volatility as global markets adjust to shifting risk dynamics.
(with inputs from Reuters)
Research Associate at StratNewsGlobal, A keen observer of #China and Foreign Affairs. Writer, Weibo Trends, Analyst.
Twitter: @resham_sng
