China Tech Stocks Drop as Alibaba’s Donation Worries Investors
(Bloomberg) — Chinese technology shares were on pace to snap a four-day rally, as investors remained wary over new clampdowns coupled with the impact of Alibaba Group Holding Ltd.’s large donation on its balance sheet.
The Hang Seng Tech Index dropped 1.2% as of 11:37 a.m. in Hong Kong, in part led by Alibaba Group, which fell as much as 4.1%. The decline came on concerns that the e-commerce giant’s $15.5 billion pledge to Beijing’s “common prosperity” vision would hit profits in coming years.
“The donation doesn’t guarantee that there will not be more regulations to target at Alibaba,” said Castor Pang, head of research at Core Pacific Yamaichi International H.K. Ltd. “It’s more or less affecting the whole tech sector sentiment today.”
Also, the handout is “a big deal” and the company’s future earnings growth could fall to low double digit, which would “make its shares a completely different asset,” he said.
Alibaba joins a growing number of its largest peers in promising to give back after accumulating vast wealth during a decade-long mobile internet boom. Pinduoduo Inc. pledged its next $1.5 billion in profit to farmers’ welfare. Tencent Holdings Ltd. said last month it will double the amount of money it’s allocating for social responsibility programs to about $15 billion.
Meituan was the worst performer in the tech gauge on Friday, as traders continued to sell after the firm and some other car-hailing service providers were asked by the government to rectify instances of what it considers misconduct by December.
On Thursday, China’s broadcaster regulator also ordered sweeping action to clean up the entertainment industry, vowing to ban film stars with “incorrect”politics, cap salaries and address problems in the fan-based culture. Entertainment shares were mixed, with Mango Excellent Media Co. dropping as much as 5.3% while Huayi Brothers Media Corp. and Alibaba Pictures Group Ltd. climbing at least 1.7%.
More stories like this are available on bloomberg.com
Subscribe now to stay ahead with the most trusted business news source.
©2021 Bloomberg L.P.