China’s tech stocks fell once again on Wednesday following a weak session for their US peers and as firms backed by Tencent Holdings came under pressure after the firm pared investment in the sector for a second time in two weeks.
The Hang Seng Tech Index fell as much as 4% — the most in about four months — in a third day of declines. The gauge is set for its lowest close since its inception in July 2020 with Tencent investees Bilibili, Meituan and JD.com among the biggest losers.
The Chinese tech giant cut its stake in Singapore’s Sea Ltd on Tuesday — selling US$3-billion of shares — sparking concerns of similar actions at other firms amid Beijing’s regulatory crackdown. China’s US-listed tech shares fell overnight amid a broad selloff in the sector, with traders spooked by the rise in treasury yields putting pressure on stocks with extended valuations.
Tencent’s move is aiding expectations that the firm and its rivals may pare holdings to address Beijing’s goal of curbing monopolies in the sector. Last month it said it plans to distribute more than $16-billion of JD.com’s shares as a one-time dividend.
Tencent controlled a portfolio of investments worth $185-billion at the end of September, Bloomberg Intelligence estimates.
Live-streaming platform operator Bilibili dropped as much as 9.4% while food delivery giant Meituan dropped as much as 8.6%. China’s second largest online retailer, JD.com, fell as much as 7.2% and Tencent itself declined as much as 4.2%.
“China’s anti-monopoly rules and regulators’ concerns about data privacy as well as Web security may lead to more divestment in the country’s Internet space in the coming months,” Bloomberg analyst Cecilia Chan wrote in a note.
On a more positive note, Alibaba Group outperformed after Daily Journal, a newspaper and software business that counts Charlie Munger as chairman, nearly doubled its holding of the Chinese Internet giant in recent months. — Abhishek Vishnoi, (c) 2022 Bloomberg LP