China Tech Gauge Approaches Year Low as Selloff Deepens
(Bloomberg) -- Chinese technology shares listed in Hong Kong slipped as trading resumed after the long weekend, showing that investor sentiment toward the battered sector remains weak heading into the year-end.
The Hang Seng Tech Index closed down 0.9% -- paring a fall of 1.6% in the morning -- amid holiday-thinned trading, extending its declines of the past two weeks and approaching a 2021 low reached on Dec. 20. Shares of Meituan, Kuaishou Technology and Tencent Holdings Ltd. were among the biggest drags on the measure.
Sentiment was dented after Chinese authorities unveiled new rules and a proposal in the past week to tighten scrutiny on overseas share sales in the wake of Didi Global Inc.’s controversial listing. While regulators stopped short of a ban on initial public offerings by companies using the so-called Variable Interest Entities (VIE) structure, the rules would make the process more difficult and costly.
“The recent VIE rules are another reminder that Beijing is still trying to tighten controls - and this is now limiting firms from accessing foreign capital - a key ingredient for growth in the past,” said Wai Ho Leong, a strategist at Modular Asset Management (Singapore) Pte.
Shares of Kuaishou dropped 4% to an Aug. 27 low, while Tencent slid 2.1%. Meituan lost 1.2%.
Meanwhile, Hong Kong’s benchmark Hang Seng Index added 0.2% while the mainland’s CSI 300 Index advanced 0.7%.
Some analysts were less concerned about the latest bout of regulations, deeming them as providing clarity on a closely watched topic this year as traders long for an end to the worst of the regulatory cycle for the tech sector.
The proposal by China’s securities watchdog that companies can list overseas as VIE if they register with regulators and meet compliance rules will help eliminate regulatory uncertainties facing both overseas-listed Chinese firms and investors, China International Capital Corp. analysts wrote in a note. It will also provide a better listing environment, they added.
China’s tech giants have had a tough year as Beijing took aim at their business models by stepping up scrutiny of monopolistic practices and data security among other things. The Hang Seng Tech Index has nearly halved from a February peak.
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