Asian Tech Rout Worsens as China Index Closes Near Record Low
China Tech Stock Gauge Hits Lowest Level on Yields, Crackdown
(Bloomberg) -- The global selloff in technology stocks deepened in Asia on Tuesday amid investor fears of higher interest rates, with a benchmark tracking Chinese technology stocks in Hong Kong closing near a record low.
The Hang Seng Tech Index, which officially launched in July last year, fell 0.3% after paring earlier losses of as much as 2.5%. The gauge, which counts Tencent Holdings Ltd. and Alibaba Group Holding Ltd. as key members, is headed for a fourth consecutive weekly decline.
Megacap technology stocks that rallied through the pandemic have declined as increased regulatory oversight and a sudden spike in yields triggered investor fears of a bubble. Chinese companies, already caught up in Beijing’s regulation drive, have been hit especially hard.
U.S. tech giants slumped overnight, with the so-called Faamg group losing $238 billion in market value and Amazon.com Inc. incurring year-to-date losses. Hong Kong’s tech measure is now down nearly 46% from a February peak and its members have lost about $1.4 trillion in market value.
“It’s quite the perfect storm of headwinds at the moment,” said Bloomberg Intelligence’s analyst Matthew Kanterman. “The confluence of factors including continued regulatory headwinds, rising interest rates and China property contagion fears will probably keep weighing on China’s tech sector in the near-term.”
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Online entertainment platform Bilibili Inc. dropped 2.6% in Hong Kong, among the worst laggards on the gauge, while Alibaba Group slipped 1.2%. Both stocks are trading at record lows. Industry bellwether Tencent was down 1.5%.
The selloff extended to other parts of Asia. Z Holdings Corp., the SoftBank Group Corp.-backed search engine operator, ended down 5.6%, the most in five months, while Naver Corp., monikered by some as the Google of South Korea, closed 3% lower.
Investors are worried how inflation and regulations coming out of China will impact the sector, Christina Woon, an investment manager at abrdn told Bloomberg in a radio interview. “People are adopting a bit more more of risk-off attitude here and that’s’ probably likely to persist” until authorities ease some of those pressures, she added.
China’s tech sector has been buffeted as authorities tightened controls on private enterprise to meet President Xi Jinping’s vision of “common prosperity.” Concerns of global contagion from the potential collapse of indebted property developer China Evergrande Group have added to the rout.
The worries unseated Hong Kong as Asia’s No. 2 market behind Japan in late July and pushed the financial center’s benchmark Hang Seng Index into a bear market in August. The Hang Seng China Enterprises Index is this year’s worst-performing major stock gauge globally.
While China tech stock valuations have tumbled, “without a catalyst or resolution to the various headwinds, it’s hard to see trends reversing in the near term,” said Kanterman.
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