China’s tech giants have wiped out $ 823 billion and are not done yet | Business and Economy News


Falling ratings also offer a rare opportunity to buy fast-growing internet companies at highly attractive prices.

China’s tech giants have wiped out the combined $ 823 billion since its February highs, and Beijing’s expanding crackdown on the sector is fueling investor concern that the sale is not far from over.

Authorities on Tuesday issued a major warning to the country’s largest companies, promising to tighten oversight of data security and overseas listings just days after Didi Global Inc.’s contentious decision. of making itself public in the United States, which has put more pressure on China’s largest technology. names including Tencent Holdings Ltd., Alibaba Group Holding Ltd., JD.Com Inc., Baidu Inc. in Meituan.

“Sales will continue in the third quarter,” said Paul Pong, managing director of Pegasus Fund Managers Ltd. He says it sold two-thirds of its technology shares, including to Tencent and Alibaba, in May. “The authorities’ measures will continue to come.”

The Hang Seng Technology Index, which has members of China’s leading technology companies, fell to 1.9% on Wednesday, poised for its sixth consecutive day of falls. Tencent and Meituan fell to 3.7%, among the biggest declines in the Hang Seng index. Alibaba fell 2.1%.

China’s global warning followed on Tuesday following the opening of a security review by the country’s Internet regulator in Didi and the demand for app stores to remove it. The move shocked investors and industry executives and has marked the Hong Kong shares of partners like Tencent, one of Didi’s largest sponsors.

Investors are worried that the latest security-based investigations have opened a new front in President Xi Jinping’s broader campaign against China’s Internet giants, which began in November with the collapse of the mega IPO of Ant Group Co. and subsequent antitrust investigations into Alibaba and Meituan. Over the weekend, China faced two more companies that have also recently traded in New York: Full Truck Alliance Co. and Kanzhun Ltd.

Investors are likely to have “a sell-first approach, talk later” to limit the political risks of their portfolio, said Justin Tang, the head of Asian research at United First Partners in Singapore. Stock prices are likely to be driven by short-term sentiment changes rather than company fundamentals, Jian Shi Cortesi, a Zurich-based GAM Investment Management fund manager, wrote in an email.

It is true that ratings may start to look attractive. Tencent, Alibaba and Baidu Inc., among the first Chinese technology companies to enter public markets and the largest, traded an average of 22 times the expected profits over the next 12 months. This compares to a ten-year average of 26 times, according to data compiled by Bloomberg.

“Should market sentiment enter into extreme pessimism and see the Hang Seng Tech index fall 20% from here, it could be a rare opportunity to buy some fast-growing Chinese internet companies at prices extremely attractive, ”said Jian Shi of GAM.

The Hang Seng Technical Index is down 31% from the February high. Mainland Chinese investors, who accounted for about a third of Tencent’s share turnover this year, converted net sellers of the shares in June.

“While maintaining the long-term future of Chinese technology, it will be a warning to investors in the short term,” Tang told United First.

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