The Hang Seng Technology Index fell by no less than 5 percent to its lowest level since November
Tech giants from Tencent Holdings to Alibaba Group Holding went into hiding after US regulators revived threats to eject China’s largest companies from US stock exchanges, adding to concerns about growing domestic antitrust crackdown. Tencent and Alibaba fell more than 5 percent in Hong Kong on Thursday before making up for losses, and participated in a US sellout that wiped out more than 20 percent of Chinese tech names, including Tencent Music Entertainment and iQiyi Inc., Baidu Inc. ‘ s Netflix-esque streaming subsidiary. The Hang Seng Technology Index fell by no less than 5 percent to its lowest level since November.
The losses followed a warning from the Securities Exchange Commission that it is taking steps to force accounting firms to have US regulators review the financial audits of foreign companies – the penalty for non-compliance is withdrawal. That threat worsened sentiment in China’s giant technology sector, just as Beijing cracked down on the country’s largest companies, fearful of their growing power after years of relatively unfettered expansion.
Sentiment was hurt after Chinese technology stocks fell overnight on Nasdaq, while local reasons accelerated the sell-off, including a lack of upward surprises in Tencent’s earnings and concerns about government regulation in the sector, Daniel So said. an analyst from CMB International.
On Wednesday, Bloomberg News reported that the Chinese government has proposed establishing a joint venture with local technology giants to oversee the lucrative data they collect from hundreds of millions of consumers. The preliminary plan, led by the People’s Bank of China, would represent a significant escalation in regulators’ efforts to tighten their grip on the country’s internet sector. Tencent executives sought to dampen the impact of Beijing’s tightening controls after reporting sales growth that barely lived up to expectations.
“The main reason is still the valuation,” said Linus Yip, Shanghai’s First Securities analyst. Even after such a big drop, the industry is still not cheap. I don’t think technology stocks will resume an upward trend anytime soon. Any bad news will lead to further sell-offs, be it a Nasdaq plunge or news about the market. Chinese regulations. “
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