Panic selling hit Chinese stocks Monday, including internet giants such as Alibaba, JD.com and Baidu, due to the triple whammy of regulation fears, a Covid resurgence and concerns over Beijing's close relationship with Russia.
Hong Kong's Hang Seng closed down 5% Monday to its lowest level since August 2007. The Hang Sang Tech Index plunged 11% in its worst decline since the gauge launched in July 2020.
Alibaba stock plunged 10.3%, closing at 77.76 on the stock market today. JD.com toppled 10.5% to 42.94. Baidu dropped 8.4% to 108.97. Pinduoduo collapsed 20.5% to 25.53 and NetEase sank 9.6% to 71.53. Tencent Holdings had not yet officially closed yet but was down 8.9% to 40.76.
Regulatory fears heightened as the plunge in Tencent stock came as China's top leaders and policymakers wrapped up two annual conferences last week in Beijing. The National People's Congress and Chinese People's Political Consultative Conference. They're China's largest annual political gatherings.
Multiple delegates at the two-day event suggested the government tighten its control over video games to keep minors away from such content. The comments signaled that there is little political appetite for pushing to ease restrictions on the industry. Tencent and NetEase are the two largest video game companies in China.
Tencent is facing a potential record fine for violations of some central bank regulations by its WeChat Pay mobile network, according to a report from the Wall Street Journal. Financial regulators recently discovered that WeChat Pay had flouted China's anti-money-laundering rules.
Covid Fears Rattle Chinese Stocks
Covid fears also rattled Chinese stocks due to a resurgence in reports of Covid-19 infections. The news about infections came from the Chinese National Health Commission.
Shenzhen authorities announced they will suspend public transport from March 14 to March 20. Residents have been told to avoid "all unnecessary activities." They're asked not to leave the city unless necessary as it conducts mass testing. In addition, Apple supplier Foxconn is halting operations at its Shenzhen sites, one of which produces iPhones, in response to a government-imposed lockdown.
In Shanghai authorities have been sealing off schools, residential compounds and office blocks.
The broad rout in Chinese stocks follows a report citing U.S. officials that Russia has asked China for military assistance in its war on Ukraine. Traders worry that China's help for Russia could bring a global backlash against Chinese firms, even sanctions.
Chinese stocks have been hammered since late 2020. That's largely due to extensive crackdowns by Chinese government regulators. Slower consumer spending has also taken a toll.
In the past 12 months, Alibaba stock has lost 65% of its market value. JD has dropped 47%, while Baidu is down 58%.
