China tech sell-off deepens as Tencent sale spooks traders

The Hang Seng Tech Index fell as much as 4 per cent in a third day of declines. PHOTO: REUTERS

HONG KONG (BLOOMBERG) -  China’s tech stocks fell once again on Wednesday (Jan 5) as firms backed by Tencent Holdings came under pressure after the company pared investment in the sector for a second time in two weeks.

The Hang Seng Tech Index fell as much as 4.2 per cent – the most since September – in a third day of declines, with overnight weakness in US peers also weighing. The gauge is set for the 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 (S$4.07 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 sell-off in the sector, with traders worried about 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 as Beijing punishes the country’s tech giants for anti-competitive behaviour, including maintaining closed ecosystems that favour certain firms at the expense of others. Last month, the company said it plans to distribute more than US$16 billion of JD.com’s shares as a one-time dividend.

“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 Intelligence analyst Cecilia Chan wrote in a note.

Tencent controlled a portfolio of investments worth US$185 billion at the end of September, Bloomberg Intelligence estimates.

Among Tencent-backed companies, live-streaming platform operator Bilibili dropped as much as 9.4 per cent while food delivery giant Meituan lost up to 11 per cent. China’s No. 2 online retailer JD.com fell 7.5 per cent and Tencent declined 4.2 per cent.

The Tokyo Stock Exchange Mothers gauge, which carries shares of small- and medium-sized software-technology companies, dropped 5 per cent to the lowest since May 2020. 

On a more positive note, Alibaba Group Holding outperformed after Daily Journal Corp, a newspaper and software business that counts Mr Charlie Munger – investment guru Warren Buffett’s long-time business partner – as chairman, nearly doubled its holding of the Chinese Internet giant in recent months.

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