Technical giants of Tencent Holdings Ltd. a Alibaba Group Holding Ltd. it submerged after U.S. regulators recovered threats to launch China’s largest companies from U.S. stock exchanges, aggravating concerns about widespread national antitrust repression.
Tencent and Alibaba fell more than 5% in Hong Kong on Thursday before matching losses and joined the United States selloff that cleared more than 20% of Chinese technology names, including Tencent Music Entertainment and iQiyi Inc., Baidu Inc.’s Netflix-like broadcast subsidiary. The Hang Seng technology index fell to 5% to its lowest level since November.
The losses continued to warning from the Stock Exchange Commission that it is taking steps to force accounting firms to allow U.S. regulators to review financial audits of foreign firms; the penalty for non-compliance is expulsion from the stock exchanges. This threat worsened sentiment in the Chinese tech giant as Beijing is expanding repression against the country’s largest corporations, fearing their growing influence after years of relatively free expansion.
“Sentiment hurt after Chinese technology stocks fell overnight on the Nasdaq,” while local reasons accelerated sales, including a lack of bullish surprises on Tencent’s earnings and concerns about government regulation of the sector, said Daniel So, an analyst at CMB International.
Wednesday, Bloomberg News reported that the Chinese government has proposed establishing a joint venture with local technology giants that would oversee the lucrative data they collect from hundreds of millions of consumers. The preliminary plan, which is being led by the People’s Bank of China, will mark a significant escalation in regulators ’attempts to strengthen control of the country’s Internet sector. Tencent executives tried to do that reduce the impact of Beijing’s intense scrutiny after reporting revenue growth that barely met expectations.
“The main reason remains valuation,” said Linus Yip, Shanghai’s first securities analyst. “Even after such a big drop, the sector is still not cheap. I don’t think tech stocks will pick up the uptrend anytime soon. Any bad news will lead to additional sales, either a fall on the Nasdaq or news about China’s regulation. “
Read more: Tencent Dives Despite guarantees about the fall of China’s antitrust
(Add a budget)