Tencent leads China tech sell-off, quashes talk of further crackdown by Beijing

[BEIJING] Chinese technology shares slumped for a second session Monday - on course for their worst two-day drop since July - thanks to renewed fears Beijing may roll out more restrictions for private enterprise.

The country's banking watchdog had issued a warning on Friday against illegal fund-raising schemes regarding the metaverse concept and an industry association vowed on Monday to resist speculative trades in the sector. Neither mentioned any company names.

Tencent Holdings Ltd - China's pioneer in metaverse development - fell as much as 6.3 per cent. Alibaba Group Holding Ltd dropped as much as 4.3 per cent. Tencent's spokesman on Monday issued a rebuttal of the rumours about Beijing's supposedly regulatory crackdown, issuing an unusually aggressive public response after fears of more tech-sector restrictions tanked markets on Monday. 

Zhang Jun,  the company's head of public relations, disputed a widely circulated post that suggested the company would weather another heavy blow from regulators in the near future. The account carrying the rumour has since been suspended, Zhang said on his semi-public WeChat feed. 

“Ask me next time. At least that’s more legit. And I’m not afraid of going on record,” he said, poking fun at the post citing an anonymous Tencent employee. Before its removal, the post was widely shared on Chinese social media and stock-trading forums. It hinted at another big step in China’s Internet crackdown, without providing specifics. 

Hong Kong's Hang Seng Tech Index, which tracks the biggest Chinese tech firms, was on track to lose over 6 per cent over the two sessions. The decline started Friday, when delivery giant Meituan plunged as much as 18 per cent after Beijing rolled out a new policy to curb delivery platform's service fees.

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"There is concern about new regulatory reforms," said Justin Tang, head of Asian research at United First Partners. "Prior to Meituan, there was a sense of 'this is it in relation to reforms'. Investors are now thinking that there could be more to come."

China Banking and Insurance Regulatory Commission warned on Friday against fund-raising and investment products related to the metaverse concept, citing the speculative nature of such investments. The metaverse industry body said on Monday that the sector should be developed to serve the real economy.

Tencent shares have lost 40 per cent since a peak in January last year. The gaming giant, along with peers such as Alibaba and Meituan, were caught in Beijing's crosshairs as China cracked down on monopolistic behaviours and tightened its grip on user data. The year-long clampdown has wiped out more than US$1.5 trillion in market value from the nation's tech sector.

Castor Pang, head of research at Core Pacific-Yamaichi, said: "The market is very fearful that more crackdowns will come and that could leave technology companies very little room to turn around their businesses. The metaverse fears shows that the market is worried that tech firms may not be able the grow a new business rapidly, like how they did in the past in China. That's really dampening the already fragile sentiment."

Investors will find out how far-reaching China's continued clampdown has been on the profitability of some of the biggest tech firms in the coming weeks as they release earnings. Alibaba will report on Thursday. "Nerves are on edge this week as Alibaba reports earnings - in the midst of war, additional Hong Kong curbs and regulatory oversight," said Wai Ho Leong, strategist at Modular Asset Management.

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