Chinese tech stocks slump after Beijing summons 34 companies in sign of heightened regulatory oversight
- Hang Seng Tech Index slumps by as much as 1.7 per cent in afternoon trading on news of summons
- Meituan and JD.com tumble by more than 4 per cent, while Tencent and Alibaba surrender most of their strong gains
Meituan, China’s biggest online booking and food delivery platform, tumbled 7.4 per cent and Tencent Holding slid 0.7 per cent, erasing an intraday gain of as much as 1.4 per cent. JD.com, the e-commerce platform that rivals Alibaba, sank 4.1 per cent. Alibaba closed with a 0.4 per cent gain, giving up a 4 per cent rally earlier in the day.
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“The market is not holding back from the [technology] sell-off, as more technology companies are becoming affected by the impact of the regulations,” said Castor Pang Wai-sun, head of research at investment services firm Core Pacific-Yamaichi. “We’re seeing a rectification of industry practices by Chinese regulators.”
In the medium term, Pang said there will continue to be selling pressure on technology companies. Investors may hold back from buying or adding more of these stocks until the situation has been cleared up, he added.
Chinese authorities are sounding the alarm and keeping a closer eye on some internet giants that have the potential to abuse their advantage and competitiveness when it comes to size, data, traffic and ecosystem, according to Bruce Pang, head of macro and research at China Renaissance Securities in Hong Kong.
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“We think markets will remain volatile,” he said. “Investors might look to bottom fish in China tech a bit, but won’t add too much even on dips. There are concerns price multiples will continue to contract on earnings downgrades.”
While traders have almost unanimously cheered that the months-long investigation into Alibaba was over, the crackdown on the sprawling expansion of the technology industry may not be over yet.
“We have seen stronger antimonopoly regulation of the sector since last year. The trend of antitrust regulation will continue to be the regulators’ focus this year,” Julia Pan, Shanghai-based analyst at UOB-Kay Hian, said in a note to clients on Tuesday.
“We believe leading internet companies such as Tencent and Meituan, with dominant market positions, are facing a similar risk to Alibaba as a variety of approaches will be taken by regulators to rein in the internet giants.”
