Chinese tech stocks fell harder than their US peers

Ustechnology stocks have slipped into correction territory. Chinese tech stocks fell further.

An index of the biggest Hong Kong-listed tech stocks fell 26% in less than three weeks, reflecting how a sudden market reversal turned into big losses for investors who piled up in popular stocks earlier this year. year.

The Hang Seng Tech Index – which tracks 30 companies, including Chinese internet giants Tencent Holdings Ltd. and Alibaba Group Holding Ltd., and smartphone maker Xiaomi Corp. – closed Tuesday at its lowest level in 2021 and is now in bearish territory, defined as a decline of at least 20% from a recent high.

By comparison, the Nasdaq Composite Index closed 10.5% lower on Monday than the index’s recent peak on February 12.

Fund managers say the trigger for the decline in the US and Asian markets was similar: a rapid and unexpected rise in Treasury bond yields, which made stocks of fast-growing companies less attractive and caused some investors to switch. from technology to banking, energy and other volatile stocks. Big Chinese tech players were hit hardest, as a flood of money from investors in mainland China drove their stock prices and valuations up sharply.

“It’s hard to call the bottom, but we see this as a healthy correction, and the market needed to make one,” said Nicholas Yeo, who oversees Chinese equities at Aberdeen Standard Investments in Hong Kong. He said the prospects for long-term growth as the country’s internet and tech giants remain intact but their stocks are vulnerable to large swings as they were among the main beneficiaries of excess liquidity on the markets. markets during the coronavirus pandemic.

Just a month ago, Meituan, a Beijing-based company that runs a popular shopping, food delivery, and reservation app, was China’s third most valuable company, with a market capitalization of over $ 300 billion. of dollars. Investor enthusiasm over Meituan’s recent expansion into wholesale grocery shopping in China has caused its shares to rise rapidly, even though the company is only making a small profit.

Meituan was one of the biggest victims of the recent sale, which has reduced its value by a third since February 17. The stock was one of the most popular purchases by investors in mainland China using the Stock Connect trade link to buy listed stocks. in Hong Kong. Outgoing flows via this link have recently resumed.

Armies of individual investors who have become more active users of mobile trading applications have also increased market volumes.

As a result, “when things start to go up, they go up very quickly. But when they start to go down, it all happens quickly too, ”said Wei Wei Chua, portfolio manager at Mirae Asset Global Investments in Hong Kong. He said his business had turned to cyclical financial names, such as insurers, and defensive games, such as utility companies.

Ken Peng, head of Asia-Pacific investment strategy at Citi Private Bank, said that as the world gradually recovered from the coronavirus pandemic, tech stocks could fall out of favor with investors. “There will be less demand for technology,” he says, “and more demand to leave your home”.

Many individual investors suffered losses from the quick sale. Huang Xiaohu, a 35-year-old tech entrepreneur in Shenzhen, previously benefited from the strong business beginnings of Kuaishou Technology, an operator of a popular short video application in China. After selling the shares he received in the company’s initial public offering, he decided to buy them back following a recent fall, but the shares continued to fall and he is sitting on losses. paper equivalent to more than $ 10,000.

“I don’t want to talk about stocks anymore. My heart is broken, “said Huang, who also owns Alibaba’s Hong Kong-listed shares, with a paper loss of around 20%. He said he plans to keep both shares in the company. hope for a recovery.

This story was posted from an agency feed with no text editing.

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