(Bloomberg) — Chinese technology shares fell on concerns about the country’s consumption outlook after Walmart Inc.’s plan to sell its stake in JD.com Inc. and disappointing profits from major players.
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The Hang Seng Tech Index was down 2.1% at 11:20 a.m. local time, led by a 12% drop in JD.com. Kuaishou Technology also fell more than 10% on disappointing advertising revenue. XPeng Inc. fell more than 5% before paring losses as the electric vehicle maker’s revenue forecast came in below estimates.
Wednesday’s pullback has investors on edge again, ending a two-week rally that has seen Chinese stocks weather a global equity rout. Tech giants’ latest earnings have been mixed at best, and Walmart’s pullback has stoked broader concerns about foreign investment as China’s economic recovery remains elusive.
The sale of the stake in JD.com “affects sentiment across the sector” as the market worries whether foreign capital, particularly long-term capital, will withdraw, said Steven Leung, executive director at UOB Kay Hian Hong Kong Ltd. “Mainland and local money will not be enough to support a meaningful recovery in the stocks.”
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Shares of Hong Kong-based JD.com rose 13% through Tuesday as the Chinese e-retailer’s revenue and profit topped estimates for the second quarter. But its overall tech earnings were far from impressive.
Vipshop Holdings Ltd., a China-based online discounter, fell 18% in the U.S. on Tuesday as its third-quarter revenue forecast missed estimates. That’s after results from Alibaba Group Holding Ltd. and Tencent Holdings Ltd. failed to ease concerns about weak consumer spending in China.
Walmart’s surprise plan to sell shares also underscores the risk of a decline in Chinese e-commerce stocks, as a short-lived rally could trigger large shareholders to reduce their holdings.
“The market could interpret it as Walmart taking a negative view of Chinese consumption, but it is not something new or unfamiliar,” said Vey-Sern Ling, managing director of Union Bancaire Privee in Hong Kong.
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