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Chinese tech giants have wiped out a combined $ 831 billion since their February highs, and Beijing’s growing crackdown on the industry is fueling investor concerns that the sale is far from over.
Authorities on Tuesday issued a blanket warning to the nation’s largest companies, pledging to step up oversight of data and listing security overseas just days after Didi Global Inc.’s controversial decision to go public to the public. United States. names including Tencent Holdings Ltd., Alibaba Group Holding Ltd., JD.Com Inc., Baidu Inc. and Meituan.
Investors are likely to take a “sell first, talk later” approach to limiting political risk in their portfolio, said Justin Tang, head of Asian research at United First Partners in Singapore. Stock prices are likely to be influenced by fluctuations in short-term sentiment as opposed to company fundamentals, Jian Shi Cortesi, Zurich-based fund manager at GAM Investment Management, wrote in an email.
Lose ground
Chinese tech giants have lost more than $ 800 billion in value since February
Source: Bloomberg
The Hang Seng Tech Index, whose members include many of China’s biggest tech companies, fell 1.9% on Wednesday, ready for its sixth consecutive day of decline. Tencent and Meituan fell 3.7%, among the biggest drops in the Hang Seng index. Alibaba fell 2.1%.
China’s general warning on Tuesday followed the opening of a security review by the national Internet regulator last week on Didi and a request for app stores to remove it. The move stunned investors and industry executives and hammered Hong Kong stocks from peers such as Tencent, one of Didi’s biggest contributors.
Investors fear the latest security-based investigations have opened a new front in President Xi’s broader campaign against Chinese internet giants that began in November with the collapse of Ant Group Co’s mega IPO. and subsequent antitrust investigations into Alibaba and Meituan. Over the weekend, China clashed with two other companies that were also recently listed in New York – Full Truck Alliance Co. and Kanzhun Ltd.
Granted, valuations may start to look attractive. Tencent, Alibaba and Baidu Inc. – among the first and largest Chinese tech companies to enter public markets, is trading an average of 22.2 times expected earnings over the next 12 months. That compares to a historical average of 26 times, according to data compiled by Bloomberg.
The Hang Seng Technology Index is down 31% from its February high. Investors in mainland China, who made up about a third of turnover in Tencent shares this year, has become net sellers of the share in June.
“While the long-term future of Chinese technology remains, it will be a warning to short-term investors,” United First’s Tang said.
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