The Hang Seng Technology Index fell 5 percent to its lowest level since November
Technology giants, from Tencent Holdings to Alibaba Group Holding, plunged after US regulators resuscitated threats to pull China’s biggest corporations off US stock exchanges, raising concerns about growing domestic anti-trust crackdowns. Tencent and Alibaba fell more than 5 percent in Hong Kong on Thursday before reducing losses, joining a US liquidation that wiped out more than 20 percent of Chinese technology names, including Tencent Music Entertainment and iQiyi Inc ., streaming similar to Netflix’s Baidu Inc. subsidiary. The Hang Seng Technology Index fell 5 percent to its lowest level since November.
The losses followed a notice from the Securities and Exchange Commission that it is taking steps to force accounting firms to allow US regulators to review the financial audits of foreign companies – the penalty for non-compliance is the expulsion of the stock exchanges. This threat has worsened sentiment in China’s gigantic technology sector at a time when Beijing is broadening its crackdown on the country’s largest corporations, fearful of its growing influence after years of relatively unrestricted expansion.
“Sentiment was hampered after Chinese technology stocks plunged on Nasdaq overnight,” while local reasons accelerated sales, including the lack of positive surprises in Tencent’s profits and concerns over government regulation in the sector, he said. Daniel So, an analyst at CMB International.
On Wednesday, Bloomberg News reported that the Chinese government had proposed to establish a joint venture with local technology giants that would oversee the profitable data they collect from hundreds of millions of consumers. The preliminary plan, which is being led by the People’s Bank of China, would mark a significant escalation in attempts by regulators to increase their control over the country’s internet sector. Tencent executives sought to contain the impact of Beijing’s heightened scrutiny after reporting revenue growth that barely met expectations.
“The main reason is still the valuation,” said Linus Yip, an analyst at First Shanghai Securities. “Even after such a big downturn, the sector is still not cheap. I don’t think technology stocks will resume the upward trend anytime soon. Any bad news will trigger new sales, be it the Nasdaq crash or regulatory news from China.”
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