Chinese Tech Stocks Extend Losses Ahead of Meituan Earnings

Shikhar Balwani and Charlotte Yang, Bloomberg News

A Meituan advertisement inside a subway station in Beijing, China on July 16, 2021. China's regulatory crackdown on technology companies shows how technology is quickly turning into the next major battleground in a clash of superpowers, with implications that potentially could reshape the global economy for decades to come. Photographer: Yan Cong/Bloomberg , Bloomberg

(Bloomberg) -- Chinese tech stocks slumped Friday amid continued concern about the sector’s earnings and the risk of local firms being kicked off American exchanges.

The Hang Seng Tech Index slid more than 5% in afternoon trading. Delivery giant Meituan plunged as much as 9.8% ahead of fourth-quarter results that may show revenue growth cooled to the slowest in more than a year. Hong Kong’s benchmark Hang Seng Index lost 3% in a second day of declines.

Friday’s trading shows that the rally fueled by easing regulator scrutiny and a more supportive policy stance is starting to lose steam. Traders grew wary after U.S. audit watchdog said Thursday that speculation about a deal that would keep hundreds of Chinese companies from being delisted from U.S. exchanges is “premature.”

READ: U.S. Says Speculation of China Stock Listings Deal Premature

“Some risk averse behavior of selling Meituan shares ahead of earnings is understandable, given most of the tech names in China reported weak results and their shares drop post result, with the exception of Xiaomi,” said Willer Chen, an analyst at Forsyth Barr Asia Ltd.

Sector giants Alibaba Group Holding Ltd. and Tencent Holdings Ltd. reported their slowest growth on record amid yearlong crackdowns by the Chinese regulators to rein in reckless expansion of capital. Tencent on Wednesday pledged to embrace the new paradigm of stricter government oversight when it announced results. Its shares sank nearly 6% on Thursday.

Among companies that have listings in the U.S., Alibaba Group slumped as much as 7.9% on Friday while Baidu Inc. slid 6.4%.

READ: Meituan 4Q Sales Growth to Cool, Focus on Covid Impact: Preview