It’s been a bad week for China’s tech sector as the value of corporate shares hit a new low, seeing how investors have yet to recover from a recent spate of wildly fluctuating prices over the past several days.
The Hang Seng Tech Index dropped by nearly 8.9%, its lowest fall since stricter regulations went into effect in July of 2020, with JD.com and Trip.com numbered amongst the losers. The main Hang Seng Index did not fare any better in its worst week since the pandemic hit Hong Kong in March 2020, falling by almost 3.9%.
Potential Delisting Leads to Sell-off
The sell-off could not have come at a more difficult time. The US Securities and Exchange Commission announced earlier this week that five Chinese firms might be delisted from key indexes if they don’t comply with mandatory auditing requirements.
The impact was felt keenly by the Nasdaq Golden Dragon China Index, which plunged by 10% as the trading week drew to a close, its biggest and hardest fall since October 2008. This is despite the assurance of the China Securities Regulation Commission that it would cooperate with its American counterpart.
China’s CSI 300 index also registered a loss of almost 2.4% this week as the National People’s Congress drew to a close. The event featured several announcements regarding tax cuts as well as fiscal support to stimulate local economies throughout the country. Unfortunately, these weren’t enough to boost investor confidence.
An Uneasy Community
It has been a rough week all around for investors, despite analysts’ predictions that delisting is most likely the least of anyone’s worries for the immediate future. But investors remain spooked by China’s ongoing crackdown on privately-held corporations, as well as the economic fallout of Russia’s invasion of Ukraine.
Equity benchmarks in Hong Kong were particularly volatile this week and prices have been unstable, wildly fluctuating several times in a day. It has not helped that Beijing has demanded popular food delivery platforms to curtail fees charged to restaurants, and that it has issued dire warnings regarding investment in the metaverse.
As if that wasn’t bad enough, the Hong Kong investments scene is also in for a rougher time. The Norwegian sovereign wealth fund has cut out Chinese sportswear maker Li Ning Co. due to suspicions that it has been violating workers’ welfare standards in Xinjiang province. Company executives worry that this might spur on an exodus on the part of other foreign investors.
