China’s STAR50 selloff erases about $480 billion

The selloff ended a rally that had run for two years after promises of economic stimulus sent shares higher.[1] Goldman Sachs data cited by Reuters showed how prominent AI stocks had become: they represented 42% of China’s market capitalization and 57% of trading turnover across mainland A-shares and Hong Kong H-shares.[1] The report said the STAR50’s valuation had fallen to about 100 times trailing earnings from a peak near 250, while the Nasdaq 100 traded at a multiple of 30.[1] Those figures frame the scale of the reversal and the valuation gap described in the report.

Reuters linked the decline to concerns about AI demand and restrictions on Chinese exports.[1] Traders also cited high prices, tax bills and the possibility of foreign bans on Chinese data-center equipment, though the report said there was no obvious selling trigger.[1] The market was also subject to a crackdown on leverage and high-frequency trading, while state-backed investors sold into rallies to keep gains in check.[1] The combination points to several pressures in the report, rather than a single event identified as the cause of the selloff.

Retail buyers oversubscribed Unitree’s listing by 8,000 times, Reuters reported.[1] The report said shares had halved since trading began in August, and that chipmaker CXMT had lost more than a quarter of its value in the month before publication.[1] Investor Chen Wensheng said he bought into the rally because he perceived official support for companies such as Unitree, which had state-backed funds among its investors.[1] Reuters reported that Chen and his friends were nursing losses after the reversal.[1]

Reuters said frustration with losses had pushed many investors toward defensive assets and was likely to slow equity fundraising by technology companies.[1] But not all investors viewed the selloff as a reason to avoid the market: some saw it as an opportunity and argued it would not harm long-term market reforms.[1] Goldman Sachs had included Innolight and CXMT among dozens of Chinese AI stocks on a revised recommendation list published earlier in the month.[1] BNP Paribas Securities strategist William Bratton said careful investors could find buying opportunities.[1]