Chinese technology stocks have fallen more than their peers in the United States

The Hang Seng Tech Index – which tracks 30 companies, including Chinese internet giants Tencent Holdings Ltd.

TCEHY 4.46%

and Alibaba Group Holding Ltd. and smartphone maker Xiaomi Corp.

1810 -0.68%

– closed on Tuesday at its lowest level in 2021 and is now in bear market territory, defined as a drop of at least 20% from a recent high.

In comparison, the Nasdaq Composite closed on Monday 10.5% below the recent high of the index on February 12.

Money managers say the trigger for US and Asian market declines was similar: a rapid and unexpected increase in Treasury bond yields, which made the shares of fast-growing companies less attractive and caused some investors to change technology for banks, energy and other less volatile stocks. China’s big tech players have taken a bigger hit, because a flood of money from investors in mainland China has dramatically raised their stock prices and valuations.

“It is difficult to define rock bottom, but we see it as a healthy correction, and the market was in for it,” said Nicholas Yeo, who oversees China’s shares at Aberdeen Standard Investments in Hong Kong. He said that the prospect of long-term growth for the country’s Internet and technology giants remains intact, but that its stocks are vulnerable to wide swings because they were among the main beneficiaries of excess liquidity in the markets during the oil pandemic. coronavirus.

Just a month ago, Meituan, a Beijing-based company that runs a popular shopping, food delivery and reservation app, was flying high as China’s third most valuable company, with a market capitalization of more than $ 300 billion. Investor enthusiasm for Meituan’s recent expansion in bulk purchases of food in China caused its shares to rise rapidly, although the company generates only a small profit.

Meituan was one of the biggest victims of the recent sale, which has reduced its value by a third since February 17. The stock was one of the most popular purchases by investors in mainland China using the Stock Connect trading link to buy Hong Kong-listed shares. Outbound flows through this link have recently increased.

Armies of individual investors who have become more active users of mobile commerce applications have also increased market volumes.

As a result, “When things start to go up, they go up very quickly. But when they start to fall, the whole thing quickly falls apart too, ”said Wei Wei Chua, portfolio manager at Mirae Asset Global Investments in Hong Kong. He said his company has switched to cyclical financial names, such as insurance companies, and defensive games, such as utility companies.

Ken Peng, head of Asia Pacific investment strategy at Citi Private Bank, said that as the world gradually recovers from the coronavirus pandemic, technology stocks may fall out of favor among investors. “There will be less demand for technology,” he said, “and more demand for leaving home.”

Many individual investors suffered losses in the quick sale. Huang Xiaohu, a 35-year-old technology entrepreneur from Shenzhen, previously profited from Kuaishou Technology’s strong commercial debut,

operator of a popular short video app in China. After selling the shares he received in the company’s initial public offering, he decided to buy them back after a recent fall, but the shares continued to fall, and he is sitting on paper losses equivalent to more than $ 10,000.

“I don’t want to talk about actions anymore. My heart is broken, ”said Huang, who also owns Alibaba’s Hong Kong-listed shares, with a paper loss of around 20%. He said he plans to keep both stocks in the hope of a recovery.

Write to Xie Yu at [email protected] and Joanne Chiu at [email protected]