China tech stock rout will likely be followed by more asset sell-offs and job losses as investors reassess sector, analysts say

A rout of Chinese tech stocks in Hong Kong and New York has wiped out trillions of dollars of market value as investors reassess the sector’s fundamentals, and analysts say further asset sell-offs and job losses could be around the corner.

Once a darling for global investors due to its high growth potential and a major jobs magnet for China’s youth, the country’s tech sector has endured a spectacular fall from grace amid a regulatory crackdown, slowing economic growth and a greater policy focus on hard tech, such as semiconductors.

E-commerce titan Alibaba Group Holding, which owns the South China Morning Post, has lost nearly 80 per cent of its value in the past two years while internet and gaming giant Tencent Holdings has seen its stock price plunge over 70 per cent from a peak in early 2021, as investors take stock of greater government scrutiny of the sector.

China’s delivery giant Meituan, short video app operator Kuaishou, and Nasdaq-listed Pinduoduo have also seen steep drops in their market capitalisation. The Hang Seng Tech Index, which comprises the 30 largest Chinese tech companies traded in Hong Kong, fell more than 9 per cent on Monday although there was a 3 per cent rebound on Tuesday.

Analysts said while Beijing’s recent crackdown on tech platforms as well as intensified US-China rivalry provided a catalyst for the sell-off, investors are now reassessing the sector’s prospects under Xi Jinping’s third term as President, which could see more uncertainty and job cuts in future.