Tech stocks sink in Hong Kong on concerns Tencent to divest more investments while Alibaba slips on antitrust fine

Tencent pared its stake in Sea Limited, a Singapore-based consumer tech firm listed in the US, following a plan to offer its stake in JD.com as special dividend
Declines in Meituan, Kuaishou and Bilibili, all partly owned by Tencent, have pushed the market towards its worst start to a year since 2005

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Zhang Shidongin Shanghai

Published: 10:46am, 5 Jan 2022

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Chinese technology stocks sank, pushing the broader Hong Kong market towards its worst start to a year in 17 years, amid concerns Tencent Holdings will keep cutting its stakes in a host of companies following several recent billion-dollar divestment plans.

The Hang Seng Index fell 1.6 per cent to 22,907.25 at the close, bringing the loss so far this week to 2.1 per cent, surpassed by only a 4.6 per cent loss in the first week of trading in 2005. The Hang Seng Tech Index tumbled 4.6 per cent, while China’s Shanghai Composite Index slid 1 per cent.

Tencent plunged 4.3 per cent after completing the sale of a 2.6 per cent stake in US-listed Singapore-based technology group Sea Limited for US$3 billion on Tuesday, raising cash for “other investments and social initiatives.”

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The divestment came less than a month after the WeChat operator offered part of its stake in JD.com worth US$16.4 billion to shareholders as special dividend.

The stake disposals fanned speculation Tencent will take similar actions break up its holdings in other tech firms to circumvent more regulatory probes. Tencent has invested in companies including Meituan, Kuaishou Technology, Bilibili and China Literature at various stages, according to its financial reports.

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Meituan, which is 19 per cent owned by Tencent, tumbled 11 per cent, while Kuaishou Technology, in which Tencent has a 21 per cent stake, slumped 7.5 per cent and Bilibili, in which the Chinese giant has a 14 per cent interest, also sild 11 per cent. China Literature, whose biggest shareholder is Tencent with a 57 per cent stake, shed 4.8 per cent and JD.com sank 7.2 per cent.

“Tencent will do more such divestments in the future and that is spooking investors,” said Dai Ming, a fund manager at Huichen Asset Management in Shanghai. “It now has to adjust its strategy against the backdrop of regulatory crackdown, which could help Tencent avoid possible monopolistic probes.”

Still, Tencent could unlock the value of its minority investments and shift its attention towards its core businesses, according to analysts at UOB Kay Hian Research, who expect Tencent to selectively divest part of its US$130 billion of investment portfolio.

Alibaba Group, the owner of the newspaper, slipped 2.1 per cent, in tandem with soured sentiment in the sector despite news that Daily Journal Corp has almost doubled its stake in the e-commerce group’s US-listed shares. Separately, China’s antitrust regulator also fined two of its units for disclosure violations.

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Meanwhile, China Huarong Asset Management plunged 50 per cent as the stock resumed trading after a nine-month trading halt. The bad-loan manager completed a US$6.6 billion recapitalisation led by state-backed investors including Citic Group.

China Mobile, the nation’s biggest wireless phone operator, rose the on the first day of trading in Shanghai, opening 9.4 per cent higher and surged as much as 10.4 per cent above its initial public offering price of 57.58 yuan. The stock closed at 0.5 per cent higher at 57.88 yuan, commanding a 43 per cent premium to its Hong Kong-traded shares that rose 3.3 per cent to HK$49.60.

Elsewhere, all the major markets in Asia fell except in Japan as rising Treasury yields heightened worries that the Federal Reserve will quicken the pace of interest rate increases.