Concerns about the Federal Reserve’s aggressive rate hikes and lingering regulatory risks hurt the outlook for the tech sector, which caused Chinese tech stocks to fall. The Hang Seng Tech Index fell 1.2% on Thursday, after briefly hitting its lowest point since it started in 2020. Shares of Xiaomi Corp. and Lenovo Group Ltd. were a big reason for this. The main Hang Seng Index dropped 0.5%, reaching its lowest level since October 2011.
After the Federal Reserve raised interest rates by 75 basis points last week and said that more pain was on the way, Chinese growth stocks have become even less risky. The selling is also part of the turmoil on the global market that is being caused by the weak pound. Investors are worried that the UK’s big tax cuts will add to global inflation. “Market sentiment is all over the place,” said Banny Lam, head of research at CEB International Investment Corp. A weaker yuan is also hurting high-priced tech stocks.
The drop in the market will be especially shocking to the government before the Party congress meeting next month, which is a big event that only happens every two years. The CSI 300 Index has dropped more than 20% this year, and it’s only 1.1% away from the lows it hit in April 2020.
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Authorities have tried to bring some calm back to the financial markets in the face of slowing growth, a crisis in the housing market, and worries about the Covid Zero policy. Chinese regulators asked big mutual fund companies and brokers earlier this month not to sell a lot of stocks before the event, even though this hasn’t done much to raise stock prices.
In case you missed it! No Chinese stock left among global Top 10 as #Tencent slides. Firm’s value has shrunk $388bn amid tech crackdown. Chinese stocks drop off league table for first time since 2017. https://t.co/cNplYuloNJ pic.twitter.com/d9zKxWuzKE
— Holger Zschaepitz (@Schuldensuehner) September 19, 2021
At the same time, the US listing status of many tech companies is still uncertain, as tensions between Beijing and Washington continue to rise. Authorities from the US and China just got off to a tense start as they met to talk about reviewing audit work papers for the companies.
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