Hong Kong stocks enter correction phase as bears maul Tencent, US audit law puts Chinese firms at risk of expulsion from Wall Street

Hang Seng Index has declined 10.2 per cent from its February 17 peak, Tencent slumps 20.9 per cent as correction, bear-market phase sets in

MSCI benchmarks tracking Chinese onshore and offshore-listed stocks have slumped by 14 to 17 per cent from their peaks before Thursday

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An investor looks at a stock quotation board at a brokerage office in Beijing, China January 3, 2020. Photo: Reuters

Published: 10:29am, 25 Mar 2021Updated: 5:03pm, 25 Mar 2021

Corrected [12:51pm, 25 Mar, 2021]

[12:51pm, 25 Mar, 2021]
Corrects changes in Tencent's market capitalisation in eighth paragraph

Hong Kong stocks fell into a correction phase while losses on mainland China markets deepened amid regulatory concerns after the US adopted rules requiring Chinese and other foreign-listed companies to submit financial audits, or face ejection from Wall Street.

The Hang Seng Index tumbled by as much as 1.5 per cent before closing 0.1 per cent weaker at 27,899.61 on Thursday. The benchmark declined for a fifth day, the longest losing streak since September 2019, bringing the slide to more than 10 per cent from its February 17 high.

The Hang Seng Tech Index fell 1.2 per cent, also a fifth day of slump. Tencent Holdings, the market’s most valuable company crashed almost 3 per cent, bringing the slide past 20 per cent from its January 25 record. A drop of 10 to 20 per cent typically denotes a correction or a bear market.

Other technology stocks also suffered a drubbing. Smartphone maker Xiaomi Corp lost 4.4 per cent to HK$23.90 while AAC Technologies fell 1.1 per cent to HK$39.65. Alibaba Group Holding, the owner of this newspaper, tumbled 3.9 per cent to HK$221.

The US Securities and Exchange Commission is taking initial steps to force accounting firms to let regulators review the financial audits of overseas companies, according to a statement on Wednesday.

The penalty for non-compliance, as stipulated by a law known as The Holding Foreign Companies Accountable Act (HFCA) that Congress approved in December, is ejection from the New York Stock Exchange or Nasdaq.

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