(Bloomberg) — Chinese technology stocks listed in Hong Kong extended their slump from an October high to around 20% as investors trimmed positions amid rising geopolitical risks and caution on earnings.
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The Hang Seng Tech Index fell 3.2% on Thursday, with JD.com Inc and Xiaomi Corp among the biggest contributors to the gauge’s decline. The sector’s weakness weighed on a broader benchmark of Chinese shares listed in Hong Kong, which fell 2.2%.
Chinese stocks have faced renewed selling pressure as newly-elected US President Donald Trump’s cabinet begins to take shape, with those critical of Beijing poised to take key positions. That has heightened fears that Sino-American tensions will escalate under the new administration. There is also caution about the earnings results of tech heavyweights JD.com later Thursday and Alibaba Group Holding Ltd. on Friday, which will shed light on the strength of Chinese consumption.
“Investors are reducing their risk exposure before making profits, and there are also concerns about Trump and profit-taking from the stimulus-driven rally,” said Vey-Sern Ling, director of Union Bancaire Privee.
The shares of Tencent Holdings Ltd. closed 0.1% lower in Hong Kong, erasing a 2.8% gain, even after earnings for the September quarter delivered a better-than-expected 47% increase. Tencent has kicked off a closely watched earnings season for big tech companies just as Beijing’s government unleashes a package of policy stimulus from interest rate cuts to debt swaps to revive the economy.
Chinese tech stocks need earnings boost amid Trump and macro threats
The slump in Chinese technology stocks shows how quickly sentiment can change when investor expectations are not met. The Hang Seng Tech index rose more than 55% in about a month through Oct. 7 as part of a broad rally fueled by China’s monetary stimulus, before losing momentum as follow-up measures failed to impress.
In the onshore market, the CSI 300 Index closed 1.7% lower, the biggest single-day loss since October 15.
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