Panic selling hit Chinese stocks on Monday, including internet giants such as Alibaba (WOMAN), JD.com (DD) and Baidu (BIDU) due to the triple whammy of concerns about regulation, the resurgence of Covid, and worries about Beijing’s close relationship with Russia.
X
The Hong Kong Hang Seng closed on Monday with a 5% drop to its lowest level since August 2007. The Hang Sang Tech Index fell 11%, its worst drop since the indicator was launched in July 2020.
Alibaba shares fell 10.3% to close on the stock market today at 77.76. JD.com fell 10.5% to 42.94. Baidu fell 8.4% to 108.97. Pingduoduo (PDD) fell 20.5% to 25.53 and NetEase (NTES) fell 9.6% to 71.53. Tencent Holdings (TCEHY) has yet to officially close but is down 8.9% to 40.76.
Regulators’ fears intensified after Tencent’s stock plunged after China’s top executives and politicians wrapped up two annual conferences last week in Beijing. National People’s Congress and People’s Political Consultative Conference of China. It is China’s largest annual political gathering.
Several delegates to the two-day event suggested that the government tighten controls on video games to prevent minors from accessing such content. The comments signaled that there was little political interest in easing restrictions on the industry. Tencent and NetEase are the two largest video game companies in China.
Tencent could be fined for breaking some central bank rules with its WeChat Pay mobile network, according to a Wall Street Journal report. Financial regulators recently discovered that WeChat Pay violated China’s anti-money laundering regulations.
Covid fears undermine Chinese stocks
Covid concerns have also rocked Chinese stocks due to renewed reports of Covid-19 infections. News of the infections came from China’s National Health Commission.
The Shenzhen authorities have announced that they will suspend public transport from March 14 to March 20. Residents were ordered to avoid “all unnecessary activities”. They are asked not to leave the city unnecessarily, as mass testing is being carried out there. Besides, an Apple Supplier (AAPL) Foxconn is shutting down operations at its Shenzhen facilities, one of which makes iPhones, in response to a government-imposed ban.
Shanghai authorities closed schools, housing estates and office buildings.
The fall in Chinese stocks followed reports from US officials that Russia had asked China for military assistance in the war with Ukraine. Traders fear that China’s aid to Russia could trigger a global backlash against Chinese firms, including sanctions.
Chinese stocks have been falling since the end of 2020. This is largely due to the massive crackdown by Chinese government regulators. The decline in consumer spending also had an effect.
Over the past 12 months, Alibaba shares have lost 65% of their market value. JD is down 47% and Baidu is down 58%.
YOU MAY ALSO LIKE:
Which stocks are showing relative growth strength?
The 5 Best Chinese Stocks to Buy and Watch
Chinese stocks tumble as earnings reports fail to ease regulators’ fears
Which stocks are breaking out or approaching a pivot point? Check MarketSmith