Chinese tech shares fell near record lows in Hong Kong, as Didi Global Inc.’s announcement to start US delisting and rising scrutiny on mainland firms traded there dealt a further blow to already soured sentiment on the sector.
The Hang Seng Tech Index, which tracks mostly big Chinese technology giants traded in Hong Kong, dropped as much as 2.5% to hover over its lowest level since the gauge was launched in July last year. Members of the index have seen about US$1.5 trillion of combined market value evaporate since a February peak.
Ride-hailing giant Didi said Thursday, Dec 2 it has begun preparations to withdraw from US stock exchanges and will start work on a Hong Kong share sale, yielding to demands from Beijing that had opposed its American listing. The news came after US regulators announced a final plan for putting in place a new law that mandates foreign companies open their books to American scrutiny or risk being kicked off the country’s exchanges within three years.
The moves added to woes faced by Chinese tech companies that have already been grappling with Beijing’s tightened regulations on areas ranging from digital finance and data security to online games and overseas listings. They also followed US Securities and Exchange Commission’s vow in July to require more information for Chinese firms seeking listings in the country.
A delisting from the US stock market could raise the Chinese firms’ cost of capital, according to a Bank of America report last month. There are more than 270 Chinese ADRs traded in the US with a combined market capitalization of US$1.8 trillion, and over 150 of them do not qualify to list in Hong Kong, the report said.
NetEase Inc., Bilibili Inc. and JD.com Inc., which all have US ADRs, were among the top losers in the Hang Seng Tech Index on Friday, each losing more than 6.4%. The declines followed the Nasdaq Golden Dragon China Index’s drop overnight to the lowest in almost 19 months in the US.
See also: China tightens securities lending rule to support stock market
The gauge has lost about 45% since a February peak, with declines accelerating in recent weeks after disappointing earnings season and a report that China plans to ban companies from going public on foreign stock markets through variable interest entities.
The continued selloff this week came after big international financial institutions increased their calls for bargain hunting last month. Goldman Sachs upgraded offshore Chinese equities to overweight from market-weight while BlackRock Inc. has had more neutral positions on China, up from underweight.
Photo: Bloomberg
