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Alibaba, Tech Stocks Slump as Tencent Warns of Wider China Crackdown

Alibaba plunged 5% and other tech firms sank in Hong Kong on Thursday after Tencent’s president warned that Beijing’s regulatory crackdown is far from finished

Alibaba's head office is seen in Hangzhou. The company shed 9,200 employees in the quarter to the end of June. File photo: Reuters.

Alibaba and other tech giants led losses in Hong Kong on Thursday after gaming titan Tencent warned that Beijing is likely to expand its crackdown on the sector, while traders were also hit by expectations that the Federal Reserve will start tightening monetary policy by the year’s end.

The Hang Seng Index tumbled 2.13 percent, or 550.68 points, to 25,316.33.

The Shanghai Composite Index shed 0.57 percent, or 19.73 points, to 3,465.55, but the Shenzhen Composite Index on China’s second exchange added 0.20%, or 4.74 points, to 2,417.23.

The sell-off in Hong Kong and Shanghai reflected a wider retreat across the world after the Fed released minutes from its July meeting showing most board members agree on tapering policy in the next few months as the economy recovers.

The move, which analysts suggest could begin in November or December, would begin chipping away at a key pillar of the rally world markets have enjoyed for more than a year.

While most markets around Asia were in negative territory, Hong Kong’s problems were exacerbated by renewed fears that Beijing has not finished with its regulatory moves against certain industries, most notably tech.

Torrid year

The sector has already had a torrid time this year as leaders look to tighten their grip on firms they consider to have gained too much power, citing anti-monopoly and national security issues.

And on Wednesday gaming firm Tencent, China’s biggest company, announced relatively healthy earnings but told investors to prepare for further curbs that will likely further hit business models and earning power.

“In the near future, more regulations should be coming,” President Martin Lau said. “This should be expected because the regulation has been quite loose over an industry like the internet, considering its size and the importance.”

Tencent ended Thursday more than 3% down, while e-commerce behemoth Alibaba, which was the first firm to feel the heat of Chinese authorities, fell more than 5% to its lowest level since listing in November 2019.

Alibaba’s HK$162.10 end price is only a little more than half the record HK$309.40 touched in October last year.

Among other tech firms, Lenovo tanked 5.9% and AAC Technologies shed 3%.

“Tencent management noted that there was ‘a lot more to come’ on the regulation front across multiple segments from different regulators. This is clearly not ideal,” Bernstein analyst Robin Zhu said.

However, there were also sizeable losses in other parts of the Hang Seng Index, with oil giants slammed by a plunge in oil prices that has been caused by demand concerns in light of the spread of the Delta Covid variant.

PetroChina plunged 5.3%, CNOOC shed 1.8% and Sinopec dived 3%.

• AFP and Jim Pollard



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This story was updated with a new headline.

Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.


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