Hong Kong stocks sink by most in 14 months as tech sell-off deepens after China unleashes new measures against Tencent, private education firms

Hang Seng Index tanked by most since May 2020 as tech wreckage leaves investors with huge losses; Chinese stocks suffer biggest slide since March

Education stocks plunge as China bans weekend and holiday lessons and halts new tuition centres; Tencent saw the biggest retreat in most in a decade

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Tech stocks are taking another huge beating in Hong Kong as regulatory hawks in Beijing unleash another round of punishments. Photo: Reuters

Published: 10:04am, 26 Jul 2021Updated: 12:31pm, 27 Jul 2021

Hong Kong stocks sank by the most in 14 months as a sell-off in Chinese technology stocks persisted after China unleashed a round of regulatory tightening against private education companies. Tencent Holdings suffered the biggest sell-off in a decade after another punishment.

The Hang Seng Index plunged 4.1 per cent to 26,192.32 at the close of Monday trading, the most since May 22 last year. The gauge declined 3.8 per cent so far this year. The benchmark fell 2.7 per cent last week after a bunch of so-called education technology and tutoring firms crashed again, after losing as much as 41 per cent on Friday following a ban on for-profit lessons and classes.

The Hang Seng Tech Index crashed 6.6 per cent after losing 3 per cent on Friday, the gauge’s worst back-to-back thrashing since November. Tencent tumbled 7.7 per cent, the most since a 9.3 per cent loss in October 2011, Bloomberg data showed. Meituan tumbled 14 per cent and Alibaba Health slid 11.5 per cent.

Stocks in mainland China markets also tanked, the CSI 300 Index of biggest stocks in Shenzhen and Shanghai closing 3.2 per cent off in the worst sell-off since March 8. The Shanghai Composite Index declined 2.3 per cent.

China issued new orders over the weekend in one of the biggest overhauls of the education sector, banning off-campus holiday and weekend tutoring and halting approvals for new tuition centres. It also separately ordered Tencent to stop its exclusive music licensing deals in another blow to the tech giant.

Koolearn Technology and New Oriental Education led another round of slump in Chinese education stocks as the shares plunged 34 per cent and 47 per cent respectively as JPMorgan slashed its price targets for both stocks, according to Bloomberg data. Both stocks lost US$3.4 billion combined in market value. Analysts at China International Capital Corp and Citic Securities warned of further correction and losses.

“The regulation is getting increasingly tighter, it will be hard for these companies’ profit to grow,” said Castor Pang, head of research at investment services firm Core Pacific-Yamaichi. “Investors are concerned that the tightening of regulation could be spread to other industries, so they are relatively pessimistic on the market in the short term.”

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