China tech selloff accelerates as weak earnings spook investors

Chinese technology shares fell sharply, snapping a three-day rally as earnings from a number of firms failed to meet investor targets.
 

The Hang Seng Tech Index closed 1.9% lower in Hong Kong. The index was weighed down by live streaming giant Kuaishou Technology and electronics component maker AAC Technologies Holdings Inc., which both fell by at least 9.2% after missing estimates.  

The continued drop comes after the government’s shock ban last month of profits at tutoring companies, which triggered a selloff of about $1 trillion in Chinese shares listed globally. Investors are concerned that even with the huge loss in market value seen already, fragile sentiment leaves the technology sector vulnerable to further losses.

“After the technical rebound in the last few days, the market is lacking momentum amid profit taking as investors are still watching out for any new regulation,” said Daniel So, a strategist at CMB International Securities Ltd. in Hong Kong. 

Kuaishou reported a wider-than-expected loss as it increased spending to retain users. Monthly and daily active users also slid from the previous quarter. Its shares, which were listed in Hong Kong earlier this year, have lost more than 80% of their value since a February peak. 

Meanwhile, China’s CSI 300 Index dropped 2%, its first decline in four days, as investors offloaded shares of liquor makers including Kweichow Moutai Co., which fell 4.2%. The baijiu giant is stressing product price stability ahead of holidays in coming months, according to a media report. 

The liquor sector’s drop is more of a “temporary pullback” following recent gains, said Capital Securities analyst Gu Xiangjun.  

In a sign that the recent market volatility has drawn the attention of China’s top leadership, a senior official on Thursday sought to allay fears that Beijing’s campaign to achieve “common prosperity” means uniform egalitarianism and could hurt entrepreneurship.

Han Wenxiu, a senior official at the Communist Party’s central financial and economic affairs commission, said at a press briefing that the authorities will promote the welfare of all people and “make the pie bigger and divide it well.” Han added that China will create more opportunities for all to become wealthy and avoid falling into the trap of “welfarism.”