China’s securities regulator has reportedly paused listings in another blow to the region, as it struggles to recover from investors’ AI fears.

The China Securities Regulatory Commission has held meetings with investment banks over the last few days about holding fire on initial public offerings, according to reports in the Financial Times.

Large sales by existing shareholders have also been temporarily suspended until markets have recovered.

The decision comes in the wake of the worst performing month for mainland China’s benchmark index in over a decade.

The CSI 300 index fell 8.5 per cent in October, taking losses for the year to 15 per cent. Meanwhile, Hong Kong’s Hang Seng has tumbled 10.6 per cent since January, while the Shanghai Composite has lost 10.3 per cent.

During Tuesday’s session, the CSI 300 index lost a further 0.2 per cent.

Prolonged downturn

Chinese equities have been caught in a prolonged downturn since the summer, as investors’ scepticism over the AI boom gained speed.

Blockbuster summer listing, Unitree Robotics, has suffered major losses since its soaring market debut, with its share price plummeting over 26 per cent.

AI firm MetaX has seen its share price tumble 31.4 per cent, while transceiver supplier Eoptolink has fallen 43.1 per cent.

Similar methods have been used by other exchanges in the region, including South Korea’s blue-chip index which has triggered 55 trading halts this year to date, temporarily cutting off investor access during volatile trading periods. 

The Tokyo Stock Exchange has also green-lit trading halts over the course of the year.

“While the measures may help shore up sentiment in the short term, they don’t tackle the deeper concerns about the economic outlook or whether the huge sums being poured into AI will generate the returns investors are banking on,” said Susannah Streeter, chief investment strategist at Wealth Club. 

“Trying to calm nerves by artificially restricting the supply of shares may buy some time, but it’s unlikely to persuade investors that the worst of the sell-off is over.’’

China’s AI woes have been felt across the region, which had initially recovered from last week’s bruising sell-offs.

South Korea’s blue-chip index fell 3.5 per cent, giving back all of Monday’s gains. Losses were led by tech heavyweights Samsung Electronics and SK Hynix which lost 4.1 per cent and 1.1 per cent respectively. 

US midterm fallout

Wall Street’s Monday rally was reversed upon Apple’s earnings, after it warned investors that higher prices will eat into profit margins.

The Nasdaq Composite Index closed on a 1.4 per cent loss, while the S&P 500 fell 0.5 per cent.

“Pretty much anything tech-momentum-AI related remains under pressure with an abortive attempt at a rally yesterday on Wall Street, a signal that buyers are not rushing to buy the dip just yet,” said Neil Wilson, investor strategist at Saxo.

The index has recovered slightly on market open, rising 2.2 per cent but, analysts are awaiting the fallout of Tuesday’s US midterms, with the performance of Democrats in particular anticipated to weigh on the performance of AI stocks.

Abbas Owainati, Head of Portfolio Management and Asset Allocation at Raymond James, said: “There’s a bit of a ‘have your cake and eat it’ dilemma. We’re seeing concern on both sides around the rapid build-out of data centres, including electricity costs, water use and pressure on local infrastructure. 

“But there is also support across the political divide for maintaining US leadership in AI, particularly given the strategic competition with China.”