(Bloomberg) — Alibaba Group Holding Ltd. dragged Chinese tech shares lower as concerns about a crackdown on the sector resurfaced after company executives were reported to be facing an inquiry linked to the theft of a vast police database.
The e-commerce giant’s stock slid as much as 5.8%, taking its decline this week to more than 15%. The Hang Seng Tech Index dropped as much as 2.1%, in line with the Nasdaq Golden Dragon China Index’s slide on Thursday.
The probe is the latest indicator to investors that risks abound when it comes to Chinese tech stocks even after the year-long clampdown on private enterprise. Fines levied on Alibaba and Tencent Holdings Ltd. over the weekend for not properly reporting past transactions had sent shares tumbling earlier this week.
“The probe will give investors pause to assess if the reforms are over or still ongoing,” said Justin Tang, head of Asian research at United First Partners. “Given the fragile state of the markets, investors will adopt a sell first and ask questions later approach.”
Executives from Alibaba’s cloud division have been summoned for talks by authorities in Shanghai in connection with the theft of a vast police database, the Wall Street Journal reported, citing people familiar with the matter. The nation had been rocked in recent weeks by one of the largest cybersecurity breaches in the country’s history, with hackers claiming to have stolen data on as many as one billion residents.
But, not everyone is worried.
The reported probe is not a regulatory issue and executives may only be facilitating the police’s investigations, according to Steven Leung, executive director at UOB Kay Hian in Hong Kong. The slide in US-listed Chinese shares was overdone, he added.
Still, there are other reasons to remain skittish on the broader Chinese equities market. Property sector risks and a resurgence of Covid cases onshore are weighing on the economic outlook. Gross domestic product rose 0.4% in the second quarter from a year earlier, the worst performance since early 2020 and below the 1.2% gain forecast by a Bloomberg survey of economists, data showed Friday.
A separate report showed new home prices in 70 cities, excluding state-subsidized housing, slipped 0.1% in June, in a 10th month of declines. The authorities also refrained from injecting funds into the banking system, while keeping borrowing costs unchanged.
(Updates with UOB Kay Hian comment in seventh paragraph)
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