Hong Kong’s stocks fell on Thursday due to fears about anti-trust investigations against Chinese mobile payment firms, tightening rules for Chinese companies to get listed overseas and rising raw material costs in China.
The Hang Seng Index, Hong Kong’s benchmark, declined by 807 points, or 2.9%, to close at 27,153 on Thursday, the lowest since December 30 last year. The index has been falling for eight consecutive days and has lost 2,135 points, or 7.3%, during the period.
Tencent, the operator of mobile payment app WeChat pay, fell 3.74% to HK$528 on Thursday.
Fan Yifei, deputy governor at the People’s Bank of China (PBoC), said in a Beijing media briefing on Thursday that the monopoly in the mobile payment sector had sustained in China after regulators summoned Alibaba’s Ant Group last year.
Fan said the mobile payment industry had grown rapidly in recent years and created problems such as the monopoly. He said the PBoC would investigate these problems and take action.
Tencent’s shares have slumped 31% from their historical high of HK$766.5 on January 25 as investors expected that the Shenzhen-based technology giants would become the next target of the Chinese regulators, who accused the Ant Group of violating the anti-trust rules.
Last November, Ant Group’s IPO, the world’s biggest, was scrapped after its management was summoned by Chinese regulators. On April 10, Alibaba was fined 18 billion yuan (US$2.77 billion) in China and ordered to restructure its mobile payment and online finance businesses.
Meituan, an online shopping platform, dropped 6.4% to HK$267.6. Alibaba Group closed down 4.1% at HK$197.3, while its subsidiary AliHealth decreased 4.4% to HK$14.74.
Didi Global
China’s technology stocks have been under pressure since Didi Global, a Chinese ride-hailing company that made its debut on the New York Stock Exchange last Wednesday, was accused by the Cyberspace Administration of China (CAC) on July 2 of having illegally collected users’ personal data.
Didi’s shares in the United States market fell by more than 20% after the CAC ordered online stores to pull the Didi app.
A recent report about Beijing’s possible move to tighten the rules for Chinese firms to go public in the US also fueled investors’ fears. The Chinese Securities Regulatory Commission (CSRC) is reportedly going to amend its rules to require firms structured using the so-called variable interest entity (VIE) model to seek approval before getting listed in Hong Kong or the US.
Media reports said Wednesday that Beijing wanted to close such a loophole long-used by Chinese companies, particularly technology firms.
Lam Ka-kei, the investment strategy director at Grand View Asset Management, said it was unclear whether the CSRC would backdate its new policy and challenge the listing status of the Chinese companies that had used the VIE model to go public in Hong Kong and the US.
Lam said many investors were worried that the tightening IPO rules, as well as the investigation into the mobile payment sector, would continue to suppress the performance of technology stocks.
Lam expected the Hang Seng Index would decrease further in the short term due to a lack of positive news in the markets. He said if the record-high US stock markets started to correct, Hong Kong’s stocks would face a significant drop.
Lam said in the coming few months, the Hang Seng Index could fall to as low as 22,000, from the recent peak of 31,0854 on February 17. He said a similar decline had happened between January and October in 2018.
Kwok Ka-yiu, a vice-president of Zhenro Asset Management, said the US stock markets had recently increased as the yield on 10-year treasury bills fell below 1.3%, the lowest in four months. He said Hong Kong stocks did not benefit from such a trend but were affected by the negative news of Didi.
He recommended that those who bought high-quality Chinese technology stocks hold the shares and wait for a rebound.
Commodity prices
Meanwhile, the Shanghai Composite Index decreased 0.8% to 3,525 while the Shenzhen Component Index fell 0.4% to 14,882 on Thursday.
On Wednesday, a State Council meeting chaired by Chinese Premier Li Keqiang said it decided to further strengthen its financial support of the real economy, especially small-and-medium-sized enterprises. It said the country would maintain the stability of its monetary policy and reduce the reserve requirement ratios (RRR) at the right time to help lower companies’ financing costs.
On June 9, the National Bureau of Statistics said China’s overall producer price index (PPI) rose 9% in May from a year ago. It said PPI for raw materials jumped 12.5% year-on-year while PPI for manufactured goods increased 4.4%.
On May 25, five Chinese government departments including the National Development and Reform Commission had a meeting with mainland suppliers of iron ore, steel, copper and aluminum, urging them to beware of speculative activities in the commodity sector.
They said the sudden increase in global commodity prices was caused by western countries’ quantitative measures launched during the pandemic.
Some economists said the Chinese government had already unveiled measures to suppress the fast-growing commodity prices, but it was still worried that the price surge would spread to the downstream of its supply chain and hurt small businesses.
They said as China had not cut its RRR since the last reduction in May 2020, the State Council’s latest announcement could mean that the country’s monetary policy would be relaxed in the second half.