Hong Kong stocks drop over China’s prolonged regulatory tightening in tech sector

The Hang Seng Index declined 2.1 per cent to 25,316.33 on Thursday, its biggest decline since July 27

Tencent falls 3.4 per cent from earlier gains of as much as 3.3 per cent, despite earnings beating estimates

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Hong Kong’s stock exchange. Chinese technology companies have suffered a US$1.5 trillion wipeout due to Beijing’s tightening grip. Photo: Dickson Lee

Published: 10:24am, 19 Aug 2021Updated: 4:40pm, 19 Aug 2021

Hong Kong stocks declined on Thursday, with losses at technology giants deepening, as the impact of China’s regulatory tightening continued to hurt investor confidence.

The Hang Seng Index declined 2.1 per cent to 25,316.33, its biggest decline since July 27. On the mainland, the Shanghai Composite Index also lost, closing 0.6 per cent lower for the day at 3,465.55.

In Hong Kong, the Hang Seng Tech Index declined by 2.9 per cent. Tencent Holdings swung to losses from earlier gains despite its earnings beating estimates. The largest private company in China fell 3.4 per cent to HK$421.20, after rallying by as much as 3.3 per cent initially. The company reported a 29 per cent rise in second-quarter profit despite bearing the brunt of a crackdown by Beijing on the technology industry.

Tencent stock has dropped by 20.7 per cent since July 24, when Beijing issued stricter guidelines on reducing the burden of schoolchildren. This hampered education technology companies, some of them large clients of Tencent’s.

Other technology stocks hit record lows. Meituan shed 7.1 per cent, leading declines among all Hang Seng Index constituents. Alibaba Group Holding, which owns this newspaper, slumped 5.5 per cent to HK$162.10, its lowest level since listing in Hong Kong and below its 2019 public offer price of HK$176. Xiaomi lost 2 per cent.

“Worries on regulatory risks still linger, and some profit of technology companies like Tencent will be sacrificed in their philanthropy efforts,” said Ernie Hon, head of research at Essence International Securities in Hong Kong. “The government wants to develop essential technologies [such as semiconductors and new energy vehicles], and is giving less favour to internet companies.”

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