The continued crackdowns by Chinese regulators on domestic tech companies hit investors’ confidence – consequently tech stocks of the country hit new lows while Hong Kong’s benchmark index touched an almost 10-month low.
Within just a week, the fall in Hong Kong and mainland China stock exchanges saw more than $560 billion in market value being wiped off the exchanges as investors bushed out funds out of once-favoured stocks as they were about the next target of the Chinese regulators.
There was a 1.8 per cent drop in the Hang Seng while there was a 5.8 per cent fall in its weekly number which was the largest since the height of the pandemic panic in financial markets in March 2020.
Markets in Shanghai also declined as investors sold off risky corporate debt and the Chinese currency. According to analysts, the biggest weekly loss in two months was set to hit the yuan with investors turning to safety amid global coronavirus concerns.
On the other hand, gains were made by China-based tech-related companies that are listed in the United States as investors seeking a bargain took advantage of recent sell-offs in the US of Chinese stocks because of the ongoing regulatory crackdown of Chinese regualtors of its tech companies which has resulted in half a trillion dollars being wiped off from Chinese markets this week.
There was rise in stock price of between 1 and 4.5 per cent in the US of Chinese companies including Alibaba Holding Group, Tencent Music Entertainment Group, Didi Global and iQiyi Inc.
“There isn’t really one trigger, but many bits and pieces that add to the narrative to stay away from China,” said Dave Wang, a portfolio manager at Nuvest Capital in Singapore.
“Almost on a daily basis you have negative news coming out, so it forms the impression there’s no end in sight.”
A number of measures were announced by Chinese regulators just last week as a tougher competition laws were announced for the tech sector of the country and summoned executives at property developer Evergrande to order them to bring down the massive debt pile of the company. Regulators are also poised to impose regulations for liquor makers, a favourite tipple for foreign fund managers, according ot the latest reports published in China’s state media.
There is dwindling faith in the Chinese market where a floor value seems imminent after months of selling and this follows a spate of crackdowns by regulators on a range of sectors – from steelmaking to e-commerce to education.
At the end of last week, the Shanghai Composite dropped to its lowest in over two weeks with blue chip shares dropping by 1.9 per cent on Friday with the largest losers being liquor makers.
A rare b right post amid te gloom was China Telecom whose stocks surged on its debut in Shanghai.
“Tencent and Alibaba wouldn’t be trading around 20 times earnings if the general mood around them was optimism,” said Tariq Dennison, managing director at GFM Asset Management in Hong Kong, who was actually a buyer of both on Friday.
(Adapted from Reuters.com)