Tech stocks sink 3.7 per cent in Hong Kong as Chinese regulators slam market with big stick

·3-min read

Hong Kong stocks tumbled for an eighth day while the city’s tech stocks hit a nine-month low, with investors stunned by China’s regulatory curbs on the sector. Signs of potential monetary easing have failed to lift market sentiment for now.

The Hang Seng Index fell 2.9 per cent to 27,137.51 on Thursday, erasing all its gains this year as it reached the lowest since December 29. The eight-day slide matched the longest losing streak since June 10. The Shanghai Composite Index declined 0.8 per cent to 3,525.50.

Tech stocks sank by 3.7 per cent to a level not seen since October 5 as investors nursed the biggest one-day drop in four months. Meituan plunged 6.4 per cent and Alibaba Group Holding suffered 4.1 per cent. Other notable losses included Tencent Holdings, Bilibili and JD.com, all sliding by 3.6 to 7.3 per cent.

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“The market needs to re-evaluate the sector on the backdrop of all these new regulations,” said Luo Di, a Shanghai-based portfolio manager at UBS Asset Management. “Their valuation will definitely be revised downward” to reflect the changes, Luo added.

Since China surprisingly moved on Sunday to bar Didi Chuxing from the nation’s app stores, the Hang Seng Tech Index has lost US$92 billion in market capitalisation, according to Bloomberg data, with Tencent surrendering all of its gains in 2021. The tech index has lost US$616 billion since its February 17 peak, more than the size of Thailand’s equity market.

The government on Wednesday fined 22 companies for market violations, including Alibaba, the owner of this newspaper. On Thursday, five authorities led by the State Administration for Market Regulation issued implementation rules for fair competition review.

Xiaomi Corp fell 1.2 per cent to HK$25.40. The smartphone maker raised US$1.2 billion from selling dollar-denominated bonds due in 10 and 30 years.

A cleaner sweeps the ground in front of the People's Bank of China headquarters in Beijing. Photo: Bloomberg
A cleaner sweeps the ground in front of the People's Bank of China headquarters in Beijing. Photo: Bloomberg

Separately, the State Council said on Wednesday it will use monetary policy tools such as a cut in reserve requirement ratio (RRR) at an appropriate time to support the real economy, following recent data showing a cooling off in economic activity.

“The market is observing whether the RRR cut will be implemented,” said Xie Yunliang, chief macro economist at Cinda Securities, adding that Beijing also mentioned a possible cut in June last year but did not follow through with it.

New listings surged. Keymed Biosciences rose 28 per cent while Landsea Green Life Service advanced 42 per cent in Hong Kong. In mainland, Hangzhou Honghua Digital Technology soared 427 per cent and CIMC Vehicles Group added 129 per cent.

In mainland China, new energy stocks rallied, with Contemporary Amperex Technology and LONGi Green Energy Technology rising to record highs. CATL added 3.1 per cent to 559.16 yuan while LONGi gained 0.9 per cent to 90.70 yuan.

US equities advanced in overnight trading after minutes from the Federal Reserve meeting in June showed officials were still debating on how and when to start scaling back bond purchases.

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