Tech giants out Tencent Holdings Ltd. to Alibaba Group Holding Ltd. surfaced after US regulators revived threats to eject China’s largest companies from US stock exchanges, compounding concerns about a growing domestic antitrust crackdown.
Tencent and Alibaba fell more than 5% in Hong Kong on Thursday before making losses proportionate and joining a US. sale that wiped out more than 20% of Chinese tech names, including Tencent Music Entertainment and iQiyi Inc., The Netflix-esque streaming daughter of Baidu Inc. The Hang Seng Technology Index fell by no less than 5% 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 removal from exchanges. That threat worsening sentiment in China’s giant tech sector, just like Beijing the crackdown on the country’s largest corporations for fear of their growing influence 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.
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 wanted downplay the impact of Beijing’s tightened control after reporting sales growth that barely lived up to expectations.
“The main reason is still the valuation,” said Linus Yip, Shanghai Securities chief analyst. “Even after such a big decline, the sector is still not cheap. I don’t think technology stocks will go up again any time soon. Any bad news will lead to further sell-off, be it a dip in the Nasdaq or news about Chinese regulations. “
Read more: Tencent Dives Despite China Antitrust Fallout Guarantees
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