Hong Kong stocks sink as Beijing tightens anti-competition rules on tech companies and US cautions investors on China bets

Tencent, Alibaba, Meituan slumped as tech rout in Hong Kong deepens, sending the Hang Seng Index to its biggest drop since July 27
SEC chair Gensler warned investors about investing in US-listed Chinese stocks while seeking better disclosure on regulatory risks

Stocks

Martin Choi

Published: 10:59am, 17 Aug 2021

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Hong Kong and mainland China stocks tumbled by the most in three weeks after Beijing tightened its grip on technology companies with new draft rules banning unfair competition, and the US securities market watchdog cautioned investors about buying Chinese companies listed in the US.

The Hang Seng Index fell for a fourth day, losing 1.7 per cent to 25,745.87, the most since July 27. China’s Shanghai Composite Index and the CSI 300 of the biggest stocks in Shanghai and Shenzhen both declined over 2 per cent. The Hang Seng Tech Index slumped 3.1 per cent, wiping out US$56.5 billion of market value from its 30 members.

Losses deepened from early trading when jitters about Hong Kong’s decision to tighten travel curbs to stem Covid-19 infections unnerved investors, complicating efforts to revive the economy.

Alibaba Group Holding, the owner of this newspaper, fell 4.8 per cent to HK$171.80, while Meituan declined 3.5 per cent to HK$213.60. Tencent Holdings fell 4.1 per cent to HK$435, before its earnings results on Wednesday. A news report said it was halting the listing of its music-streaming unit in Hong Kong amid regulatory concerns.

Operators must not implement or assist in the implementation of unfair competition on their internet platform, or disrupt the order of market competition and affect fair transactions, according to key terms in the draft released on Tuesday.

“The policy headwinds on technology stocks have not disappeared, and while they remain investors need to stay cautious,” said Louis Wong, director at Phillip Capital Management in Hong Kong.

Business operators also should not use data or algorithms to influence users’ choices and hijack traffic, and not deploy technical means to use other business operators’ data, according to the draft, a result from its initial antitrust clampdown from November last year.

Other major casualties included Bilibili, which plunged 7.7 per cent to HK$517.50, while Baidu dropped 5.5 per cent to HK$138.70. WuXi Biologics fell 6 per cent to HK$113.70. Anta Sports dropped 4.5 per cent to HK$162.

Hong Kong will tighten entry restrictions for arrivals from 16 countries battling a resurgence in Covid-19 cases, including the US, increasing their mandatory quarantine period to 21 days, starting on Friday. The tougher regime came after a domestic worker tested positive on her return from the US this month.

Meanwhile, Gary Gensler, chairman of the Securities and Exchange Commission said a lot of US investors were not aware of the risk in owning Chinese companies traded in the US, according to a video posted on Monday. He warned investors as regulators froze stock listing applications of Chinese companies pending better disclosure.

Elsewhere, Sunny Optical rose 0.5 per cent to HK$217.80, paring gains of nearly 8 per cent after reporting strong earnings growth of 53.7 per cent to 2.69 billion yuan due to higher shipments of its handset lens, camera modules and vehicle lens. AIA rose 3.1 per cent to HK$96.95 after it raised its dividend as earnings beat estimates in the first half.

Investors are focusing next on the interim earnings from major index members, including Tencent, Geely Auto and CNOOC. About one-fifth of the members in Hang Seng Index and CSI 300 Index are due to report to shareholders this week.