Chinese tech stocks in Hong Kong and the US have already lost a lot of value in the past few days.
(Photo: AFP/Getty Images)
Beijing Losses in Chinese stocks widened on the Hong Kong Stock Exchange on Monday. The Hang Seng China Enterprise Index lost more than seven percent. The Hang Seng Tech Index recorded the highest daily loss in its history with a minus of more than eleven percent.
Traders attribute the crash to a report that Russia has asked China for military support in the war against Ukraine. The US reacted promptly and warned China of the consequences of supporting Russia. Investors fear that Russian support could result in sanctions against Chinese companies.
On the stock market, these threats are enough “to trigger the next wave of sales in Hong Kong,” emphasized Thomas Altmann from the investment boutique QC Partners. After last year’s post-pandemic high, the Hang Seng China Enterprise Index has now almost halved. The index is thus as low as it was at the height of the financial crisis. The price-to-book ratio has reached an all-time low of just 0.7.
In addition to fears that the conflict between China and the USA will be exacerbated by the opposing positions in the Ukraine war, the largest corona outbreak in China in two years is weighing on the markets. The number of new infections rose to almost 3,400 on Monday, twice as many as on Sunday. Several cities with over a million inhabitants, including the tech metropolis Shenzhen and the industrial location Changchun, are under lockdown.
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This exacerbates concerns about the already weakening Chinese economy. China’s Premier Li Keqiang warned on Friday of “downside risks”, “complications” and “uncertainties” for the Chinese economy.
Report on possible record fine for Tencent
The difficult situation in the important real estate industry continues to be one of the risks. The housing groups Country Garden (minus 22.8 percent) and Sunac (minus 19.8 percent) were among the biggest losers. In addition, the meal delivery service Meituan (minus 16.8 percent) and the e-commerce group JD.com (minus 14.5 percent) lost heavily. Chinese tech stocks in Hong Kong also lost heavily again. The Hang Seng Tech Index lost 9.6 percent.
The share of the Chinese tech social media group Tencent also lost more than ten percent. The reason for this is a Wall Street Journal report about a possible record fine for the group because the payment function of the super app Wechat could have violated money laundering rules.
Chinese tech stocks in Hong Kong and the US have already lost a lot of value in the past few days. Investors fear that rising tensions between China and the US over the Ukraine war will also make agreement on foreign IPO rules more difficult and could lead to a delisting of Chinese tech stocks in the US.
For this reason, the Nasdaq Golden Dragon Index, which includes many of the China stocks listed in the USA, lost almost 20 percent in value on Thursday and Friday last week. In Hong Kong, Chinese companies, which are listed both in the Asian financial metropolis and in the USA, were also among the biggest losers.
More: Sell-off in China’s tech stocks: SEC review raises fears of forced delisting