The rout in Chinese technology giants deepened on Thursday after the industry was hit with a fresh round of proposed regulations.
The Hang Seng Tech Index closed 2.9% lower after earlier falling to lowest since its inception in July 2020 with Alibaba Group Holding Ltd. slumping 5.5% to a record low in Hong Kong. Video streaming giant Kuaishou Technology slid 7.1% to close at new all-time low for a fifth consecutive session.
Among other shares, sector’s bellwether Tencent Holdings Ltd. reversed an initial rally to close down 3.4% and food-delivery giant Meituan tanked 7.2%, slightly more than the 6.5% drop in ride-hailing company DiDi Global Inc. in the U.S. on Wednesday.
The drops came after China said it is studying proposals to further ensure the rights of drivers who work for online companies and to step up oversight of the live streaming industry. Sentiment also soured after Tencent warned the industry to prepare for more regulations including potential substantial changes to how companies use data for advertising.
Beijing’s recent crackdowns on the tech sector wiped off about $1 trillion of market value from Chinese shares listed globally last month as they quickly expanded from antitrust and e-commerce concerns to private tutoring, data security and online content.
The selloff has prompted some global fund managers including Cathie Wood to dump their holdings in Chinese stocks over the past few months. In fact, some investors are questioning allocations toward Chinese assets altogether.
The new moves are incremental but investors are not at a point where they “will cease to price in any more additional policies,” said Shine Gao, fund manager at Taicheng Capital Management Co. “Even if the worst is over for big tech firms in terms of new regulations, we should expect that their growth won’t be what it was.”
Alibaba’s shares have slumped 30% this year in Hong Kong compared to a fall of 7% for the Hang Seng Index. Its U.S.-listed shares, which have been trading since 2014, are down about 26% for the year and still far from their record lows.
The fear of increasing regulatory curbs has pushed the Hang Seng Tech Index, the key gauge for Chinese technology stocks listed in Hong Kong, lower by more than 2.5% in three out of the past four sessions.