(Bloomberg) — Chinese technology stocks dropped on Thursday after state media ratcheted up calls for a deepening of regulation of online platforms to tutoring firms.
The Hang Seng Tech Index fell 1.3%, inching toward the lowest since its official launch that was hit last month. Stocks tracked overnight weakness in the sector’s American depository receipts after the South China Morning Post’s report that China’s scrutiny of video gaming content is getting stricter. Alibaba Group Holding Ltd. closed 4.1% lower after earlier hitting a record low in Hong Kong.
Sentiment took another blow as a government adviser wrote in a Thursday commentary in the official Economic Daily that the country should accelerate legislation at the national level covering the digital economy to ensure fair competition and innovation.
Rising U.S. bond yields will lead investors to demand higher return from equities, affecting valuations of growth stocks like Hong Kong’s tech shares, said CMB International Securities Ltd. strategist Daniel So. “The Chinese government has announced some more regulations including measures against gaming and online information regulation,” which also hurt sentiment, he said.
The commentaries by state-run media that signal a likely further intensification of China’s crackdown on technology sector came at a time when investors are navigating a global energy crunch, a power crisis in the country, rising U.S. Treasury yields and possible contagion risks from developer China Evergrande Group’s potential default.
The People’s Daily, the Communist Party’s mouthpiece, also carried an opinion piece calling for the government to strengthen its crackdown on after-school tutoring firms that have been evading regulation.
Alibaba Group declined the most on the Hong Kong’s tech gauge while JD.com Inc., operator of an online-shopping platform, was the next-worst performer as it dropped 3.6%. Industry bellwether Tencent Holdings Ltd. declined 0.8% and food-delivery firm Meituan slid 1.4%.
(Updates share prices throughout.)
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