China stocks near bear market on weak spending data

China Stocks Near Bear Market as Alibaba, Xiaomi Drag Hang Seng Lower

The Hang Seng China Enterprises Index fell as much as 2.3% on Monday as trading resumed after a holiday, pushing Chinese stocks listed in Hong Kong to the brink of bear market territory. The index has now declined nearly 20% from its October 2025 peak, approaching the threshold that formally signals a bear market.cryptobriefing

The index closed down 61 points, or 0.8%, at 7,914, while the broader Hang Seng Index ended 156 points lower at 23,768. The Hang Seng Tech Index shed 54 points, or 1.2%, closing at 4,549.etnet

Weak Consumption Weighs on Internet Giants

Alibaba, Xiaomi, Tencent, JD.com, and Meituan were among the biggest drags on the session, as disappointing consumption data and a muted “618” mid-year shopping festival sapped confidence in China’s internet and consumer sectors.valuethemarkets

China’s retail sales fell 0.6% year-on-year in May, the first decline since December 2022, according to data from the National Bureau of Statistics released last week. The contraction far undershot economists’ expectations of flat growth and followed an already weak 0.2% gain in April. Automobile sales plunged 16.1%, while home appliances dropped 15.6%.cnbc

The 618 shopping festival, China’s second-largest annual promotional event, drew to a subdued close last week. Reuters reported that the weeks-long event highlighted persistently weak consumer confidence and cautious household spending amid ongoing property-sector weakness and slower wage growth.reuters

AI Rotation Compounds the Pain

Adding to the selling pressure, investors have been rotating out of Chinese internet and consumer stocks into AI-related names in Japan, South Korea, and Taiwan, where semiconductor and technology firms have delivered outsized returns on the back of the global AI buildout.wsj

The MSCI China Index is also set to enter bear market territory, Bloomberg reported, making it one of the worst-performing major gauges globally this year. The Hang Seng China Enterprises Index has become the second-worst performing index among more than 90 tracked by Bloomberg in 2026, according to market data cited by analysts.valuethemarkets

Recovery Faces Steep Odds

To reclaim its October 2025 highs, the HSCEI would need to rally approximately 25% from current levels. HSBC recently slashed its full-year 2026 retail sales growth forecast for China from 5.2% to just 2.8% in response to deteriorating consumption trends. With domestic demand continuing to stall and capital flowing toward AI opportunities elsewhere in Asia, bullish investors face an uphill task in making the case for a near-term rebound in Chinese equities.kucoin