China’s Tech Sector Downturn Reignites Amid Policy Uncertainty Ahead of Alibaba’s Financial Report
In a resurgence of selling pressure, Chinese tech stocks experienced a downturn on Thursday, with investors bracing for Alibaba Group Holding Ltd.’s earnings report while grappling with the specter of further regulatory constraints looming over the industry.
The Hang Seng Tech Index plunged by as much as 3.9%, marking its descent to levels not seen since its inception in mid-2020, abruptly halting the rebound witnessed in the preceding session. Optimistic investors, hopeful that the worst of China’s regulatory crackdown on tech had passed, found their confidence shaken last week by fresh measures that triggered a downward spiral in stock prices starting from Friday.
Alibaba’s shares plummeted to historic lows in Hong Kong on Thursday, as anticipation mounted over financial results that are expected to reveal the e-commerce titan’s slowest quarterly revenue growth to date. Adding to the downward pressure on the tech index, Kuaishou Technology announced its decision to exclude goods from Alibaba’s Taobao platform in its live-streaming feature on the app, effective from next month.
The Hang Seng Tech Index briefly breached the lower boundary of its Bollinger Band early Thursday, a technical signal indicating that stocks are being oversold. Concurrently, the benchmark Hang Seng Index slumped to a seven-week nadir, mirroring a broader regional downtrend triggered by reports of President Vladimir Putin’s plans for a military intervention in eastern Ukraine.
Despite reassurances from a state-owned publication that the market had overreacted to new regulations on food delivery platforms, the tech sell-off persisted. Delivery behemoth Meituan saw its shares dip by as much as 3.7% on Thursday, while both Kuaishou Technology and its counterpart Bilibili Inc. registered declines of no less than 4.8%.
Beijing’s extensive regulatory campaign has endured for over a year, erasing approximately $1.6 trillion in market value from the tech sector. The Hang Seng Tech Index has now receded by more than half from its peak in February 2021.
The recent wave of regulatory actions that rattled investors commenced last Friday, when Beijing mandated delivery platforms to slash their fees. Subsequently, authorities issued warnings against illicit fundraising activities linked to the metaverse. Earlier this week, China’s anti-corruption agency disclosed that a government meeting had been convened to draw lessons from an official allegedly associated with Jack Ma’s Ant Group.