China halts IPOs as Asian markets continue to retreat under AI woes

China has halted initial public offerings (IPOs) amid a retreat in Asian markets, as the country grapples with investor concerns over the artificial intelligence (AI) sector. The China Securities Regulatory Commission (CSRC) has convened meetings with investment banks to curb IPO listings and temporarily suspended sales by existing shareholders until market recovery.

This decision follows the worst monthly performance for mainland China's benchmark index in over a decade, with the CSI 300 index falling 8.5% in October, reducing the year's losses to 15%. Hong Kong's Hang Seng and Shanghai Composite have also suffered, with declines of 10.6% since January and 10.3% respectively. During Tuesday's trading session, the CSI 300 index experienced further losses, slipping by 0.2%.

The prolonged downturn in Chinese equities began in the summer, exacerbated by investor skepticism surrounding the AI boom. Notable AI firms, such as Unitree Robotics, MetaX, and Eoptolink, have experienced significant share price declines, with losses of over 26%, 31.4%, and 43.1% respectively. Other Asian exchanges, including South Korea's benchmark index and the Tokyo Stock Exchange, have implemented trading halts to mitigate volatility.

While these measures may provide short-term sentiment support, experts argue they fail to address deeper concerns about the economic outlook and the effectiveness of AI investments. Susannah Streeter, a chief investment strategist at Wealth Club, stated that artificially restricting share supply may offer temporary relief but is unlikely to convince investors that the worst of the sell-off is over.

The AI sector's struggles have rippled across the region, with South Korea's blue-chip index and US tech stocks also experiencing declines. US midterm elections and concerns over the economic impact of AI, including data center construction and resource consumption, continue to weigh on investor sentiment.