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China's STAR50 tech index plunges 40% in four-month selloff

China's STAR50 tech index plunges 40% in four-month selloff

Money Moves

Shanghai's AI-heavy index bounces 2.45% after a 4.8% slide, with $480 billion still gone

October 28th, 2026: STAR50 rebounds 2.45% after a 4.8% slide

Overview

Updated Oct 30

The STAR50 index is still about 40% below its summer peak, a four-month slide that erased roughly $480 billion from Shanghai's largest technology and chip stocks. It rose 2.45% on October 28, a day after falling 4.8%.

State money is arriving, but not at the scale of the losses. A 60 billion yuan ($9 billion) government-backed AI fund began buying in October, and Julius Baer analyst Richard Tang said state-backed funds increased their purchases of mainland shares in recent sessions. Goldman Sachs puts AI stocks at 42% of the market value of mainland and Hong Kong listings, so the damage spread well beyond the STAR50.

Why it matters

If the selloff deepens, Beijing loses its main channel for directing household savings into AI development, and China's tech ambitions slow.

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Key Indicators

40%
STAR50 decline from June peak
Index is about 40% below its high. It fell 4.8% on October 27 and rebounded 2.45% the next day.
$480 billion
Market value erased from STAR50 stocks
Combined market capitalization of index constituents since the summer high.
~100x
STAR50 trailing price-to-earnings ratio
Down from nearly 250x at the June peak.
$2.4 trillion
Total Chinese market value lost since May
Figure published in late October across mainland-listed A-shares and Hong Kong shares.
60 billion yuan
State-backed AI fund now buying
A government AI investment fund, about $9 billion, began deploying capital in October.
~100x
STAR50 trailing price-to-earnings ratio
Down from nearly 250x at the peak; the Nasdaq 100 trades at about 30x.

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People Involved

Dong Baozhen
Dong Baozhen
Beijing-based fund manager
Says the bubble is now bursting as the index sits about 40% below its peak
LW
Leo Wang
Partner at Qianchuang Capital
Criticizing index composition distortions
WQ
Wu Qing
Chairman, China Securities Regulatory Commission
Weighing market-stabilization options while a state AI fund begins buying

Organizations Involved

China Securities Regulatory Commission
China Securities Regulatory Commission
Federal Agency
Regulating the market as state money returns in small size

China's top securities regulator, responsible for overseeing the nation's stock exchanges and listed companies.
SS
Shanghai Stock Exchange STAR Market
Stock Exchange Segment
Down about 40% from its summer peak, with a 2.45% bounce on October 28

The Science and Technology Innovation Board (STAR Market), launched in 2019 to fund China's tech sector.
Morgan Stanley
Morgan Stanley
Investment Bank
Predicting further downside

Global investment bank whose analysts cover Chinese equity markets.

Timeline

2024 October 2026

10 events Latest: October 28th, 2026 · 2 weeks ago
Tap a bar to jump to that date

  1. STAR50 rebounds 2.45% after a 4.8% slide

    Latest Market

    Shanghai's tech index rose 2.45%, and the CSI300 and Shanghai Composite each gained about 0.9%. SK Hynix's strong quarter lifted AI shares across Asia, and Unitree closed 9% higher.

  2. STAR Market plunge confirmed as AI selloff deepens

    Market

    Reports confirm STAR50 down 40% in under four months; broad Chinese markets down $2.4 trillion since May.

  3. STAR50 closes at 1,315.50, down 2.23%

    Market

    Index extends losses, confirming a 40% decline from its June peak and $480 billion in erased value.

  4. State-backed AI fund starts deploying capital

    Policy

    A 60 billion yuan (about $9 billion) government-backed AI investment fund began putting money into the market in October, small next to the losses.

  5. CSRC tightens IPO standards for robot companies

    Regulation

    Regulator informally tells industry that humanoid robot firms must show revenue, not just prototypes, to list.

  6. Physical AI investment falls 40% in a month

    Market

    Investment in China's physical AI sector drops from 19.4 billion to 11.6 billion yuan between August and September.

  7. Unitree lists with 8,000x retail oversubscription

    Market

    Robot-maker Unitree IPOs with shares 8,000 times oversubscribed by retail buyers; stock later halves.

  8. Chipmakers MetaX and Moore Threads halve

    Market

    Two AI chip companies that had surged 700% and 400% on debut lose half their value from July highs.

  9. STAR50 peaks at extreme valuations

    Market

    Index hits its high with AI stocks trading at roughly 250x trailing earnings and making up 42% of the market value of mainland and Hong Kong listings.

  10. Stimulus promises ignite a two-year rally

    Market

    Economic stimulus announcements send Chinese tech stocks soaring, starting a two-year bull run.

Scenarios

1

STAR50 drops another 15% as selloff deepens

Possible Resolves by Apr 30, 2027

Discussed by: Morgan Stanley analysts (via SCMP)

Morgan Stanley warns Chinese stocks could lose another 15% as the AI unwind continues. With STAR50 still trading at roughly 100x trailing earnings — more than three times the Nasdaq 100's multiple — institutional buyers see room for further compression. US restrictions on Chinese data-center equipment would accelerate the decline.

2

STAR50 stabilizes near current levels

Possible Resolves by Q1 2027

Discussed by: Hong Hao, Lotus Asset Management; Asia funds overall remain overweight on China

Valuations reach levels institutional buyers accept, and state-backed funds step in to cushion further falls. The CSI300 has already corrected about 20%, which historically has marked the end of Chinese market corrections. Fund managers like Hong Hao note the selloff is a natural correction, not a fundamental breakdown.

3

Beijing announces market support measures

Possible Resolves by Q2 2027

Discussed by: Analysts noting state funds were sellers during the rally; market participants at CSRC meetings

If the decline accelerates toward bear-market territory, Beijing could respond with state fund buying, an IPO moratorium, or trading curbs — tools it used after the 2015 crash. The CSRC's October meetings with market participants suggest regulators are already weighing options. Support measures could slow the decline but may not reverse it.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

March 2000 - October 2002

Dot-com crash (2000-2002)

The Nasdaq Composite peaked in March 2000 with internet companies trading at triple-digit earnings multiples on retail speculation. When earnings failed to materialize, the index fell roughly three-quarters over the next two years, wiping out trillions in market value.

Then

Most dot-com companies went bankrupt. Surviving firms saw share prices fall 80% or more before stabilizing.

Now

The Nasdaq took nearly 15 years to regain its 2000 peak. The crash reset expectations about what internet companies were really worth.

Why this matters now

Like China's STAR50, the dot-com rally was driven by retail enthusiasm and a belief that any company in a hot sector would grow forever. The question is whether China's AI suppliers have revenue to justify current multiples — or whether the parallel extends to the aftermath.

June - August 2015

China's 2015 stock market crash

The Shanghai Composite more than doubled in the first half of 2015 on margin-funded speculation, then fell about 40% in two months after regulators moved to curb leverage. Beijing deployed state funds and banned large shareholder sales to stem the collapse.

Then

State intervention stabilized the market, but millions of retail investors lost heavily. Margin calls forced further selling.

Now

The crash led to years of regulatory tightening and a reputation for volatility that Beijing has struggled to shake.

Why this matters now

The 2015 pattern — a government-encouraged retail boom ending in sharp reversal — closely mirrors today's AI stock story. Beijing's push for a 'slow bull' market was meant to prevent a repeat; the STAR50 selloff suggests it may have failed.

Sources

(10)
+4
Reuters The Guardian South China Morning Post Silicon Report Seoul Economic Daily Decrypt Open Magazine 24/7 Wall St. Pomegra News THIS! Newsroom