China stocks bounce back from bear market on state buying

Chinese stocks rebounded on Friday, October 23, as trading picked up in exchange-traded funds favored by the state-backed "national team." Benchmarks recovered a day after the market entered a bear market. The CSI 300 Index gained in the afternoon session and closed 1.7% higher, erasing an earlier drop of as much as 1.9%, Bloomberg reported.bloomberg.com

The rebound shows that Beijing is willing to step in. It also raises the question of whether state money alone can turn around a sell-off that has run for months.

Inflows into broad-based funds

The Shanghai Composite rose 0.89% and the Shenzhen Component climbed 2.79%, coming back from a more than two-month low earlier in the session, according to Trading Economics. Turnover across nine ETFs favored by the national team reached about 60 billion yuan ($8.99 billion). The E Fund ChiNext ETF led the way with 15 billion yuan in inflows, its most since July, Trading Economics reported. AI-related shares also recovered, including Cambricon Technologies, SMIC Semiconductor Manufacturing International Corporation and Zhongji Innolight.tradingeconomics.com

The buying began on Thursday. The nine ETFs drew a combined net 46 billion yuan that day, the most since the tariff-driven sell-off in April 2025, Trading Economics noted. Broad-based ETFs took in 51.7 billion yuan on October 22, more than 80% of total ETF net inflows, according to Gelonghui data published by Futu News. Three CSI 300 funds absorbed 23.5 billion yuan. The Huatai-PineBridge CSI 300 ETF took in 10.45 billion yuan on its own, the only fund that day to top 10 billion yuan. Semiconductor ETFs, by contrast, saw outflows.news.futunn.com+1

A 10-week slide

On Thursday, the CSI 300 fell 1.8% to its lowest close since July 2025. That left it 20.2% below its June 22 closing peak, Reuters reported. The index had fallen for 10 straight weeks. Bloomberg said the rout has erased $2.4 trillion in market value since a peak in May. It pointed to a long slump in consumer spending and growing doubts about whether AI companies can turn a profit. Beijing's October 22 deadline for wealthy individuals to declare and pay tax on offshore trust income may also have pushed some investors to sell shares to raise cash, according to Reuters.bloomberg.com+2

Limits of state support

Analysts doubt that state buying alone can produce a lasting recovery. Bloomberg Intelligence estimates that Central Huijin raised $231 billion by selling ETFs in the first half of the year and has reinvested only about $43 billion since it resumed buying in July, per Yahoo Finance. In 2024, steady ETF buying cushioned stocks through the summer, but a lasting rebound came only after broader policy measures in September.finance.yahoo.com

"With no global equities rebound to rely on, the national team might need to buy more and do so for longer than in its two most recent rescues," Bloomberg Intelligence analysts including Rebecca Sin wrote, as reported by The Edge Malaysia. Even after Friday's gains, the Shanghai Composite ended the week down 0.69%, Trading Economics reported.ceomorningbrief.theedgemalaysia.com+1