Alibaba sinks to record low in Hong Kong as China widens crackdown

[HONG KONG] Alibaba Group Holding shares slumped as much as 5.4 per cent to a record low in Hong Kong on Thursday, extending a sell-off in Chinese technology giants after Beijing hit the industry with a fresh round of regulations.

Shares dropped after China said it is studying separate proposals to further ensure the rights of drivers who work for online companies and to step up oversight of the live streaming industry.

Sentiment for China's largest advertising platform also soured after peer Tencent Holdings executives said in a post-earnings conference call that the government can make fairly substantial changes to how companies use data for advertising.

Beijing's recent crackdowns on the tech sector wiped off about US$1 trillion of market value from Chinese shares listed globally last month as they quickly expanded from antitrust and e-commerce concerns to private tutoring, data security and online content.

Alibaba's shares have slumped 30 per cent this year in Hong Kong compared to a fall of just under 7 per cent for the Hang Seng Index. Its US-listed shares, which have been trading since 2014, are down about 26 per cent for the year, and still far away from their record lows.

The sell-off has prompted some global fund managers including Cathie Wood to dump their holdings in Chinese stocks over the past few months. Also, some investors are questioning allocations towards Chinese assets altogether.

The new moves are incremental but investors are not at a point where they "will cease to price in any more additional policies", said Shine Gao, fund manager at Taicheng Capital Management. "Even if the worst is over for big tech firms in terms of new regulations, we should expect that their growth won't be what it was."

The Hang Seng Index fell as much as 2.3 per cent on Thursday while the Hang Seng Tech Index, which counts many Chinese tech giants as its members, dropped to the lowest since its July 2020 inception.

Tencent reversed earlier gains of as much as 3.4 per cent to trade down nearly 3 per cent in Hong Kong as its warnings for more regulatory curbs on the industry overshadowed second quarter earnings that beat estimates.

BLOOMBERG