(Bloomberg) — China’s technology stocks slumped, tracking a tumble in its U.S.-listed peers, as growth worries from the nation’s Covid Zero policies and lack of concrete measures to support the sector triggered further selling.
The Hang Seng Tech Index slid as much as 4.5% early Friday, declining for the fourth straight session. The losing streak threatens to erase last week’s rally spurred by the nation’s top leaders promising to loosen a regulatory crackdown on the sector.
Friday’s slide follows a 7.7% drop in the Nasdaq Golden Dragon China Index, as overseas investors reassessed the Federal Reserve’s tightening path. The move also suggests that a barrage of pledges by Chinese authorities since mid-March — most recently on Thursday — to go soft on the sector has failed to convince investors that the regulatory environment will improve.
China’s Leaders Warn Against Questioning Covid Zero Policies
Also weighing heavily on traders’ minds is the latest warning from Chinese leaders not to question President Xi Jinping’s Covid Zero policy. A slew of disappointing economic data from China has highlighted the growing toll of the lockdowns, and market watchers say the outlook will stay dim unless that stance shifts.
“Although the valuation for Chinese tech giants have been largely beaten down over the past one year, we may have to see a clear control of China’s virus situation or more follow through in support measures in order to lift market confidence,” said Jun Rong Yeap, a strategist at IG Asia Pte. “With relief catalysts such as earnings seasons and Fed meeting largely behind us now, markets are in need of a new relief catalyst.”
The Hang Seng Index was down as much as 3.3%, while on the mainland, the benchmark CSI 300 Index slid more than 2%.
Staying Power
Thursday’s statement from the Politburo’s Standing Committee sent a clear message that Covid restrictions and broad lockdowns are here to stay. That means policy makers will likely use other measures to prop up growth.
“No one who has been trading in the China market for any period of time has realistically expected a relaxation to Covid policies in the short term,” said Chen Yicong, managing director at Beijing Chengyang Asset Management. He added that Friday’s moves are more likely from the impact of U.S. declines.
Regional tech stocks also fell Friday, with the the MSCI Asia Pacific Information Technology Index down as much as 2.3%. A gauge of chipmakers in the region slumped 3.3%.
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