(Bloomberg) -- Chinese technology stocks extended their rout in Hong Kong on Monday, as a lockdown in Shenzhen added to investor angst over geopolitical and regulatory risks.
The Hang Seng Tech Index fell as much as 5.1% in early trade, with the sector again at the forefront of losses in Hong Kong and China stocks. The Golden Dragon Index, which tracks U.S.-listed Chinese stocks, plunged 10% on consecutive days last week -- something that’s never happened before in its 22-year history.
The tumble follows a Friday report that Didi Global Inc. has suspended preparations for its planned Hong Kong listing after failing to appease regulatory demands, reigniting fears over Beijing’s crackdown. Also hammering stocks are a growing Covid-19 outbreak, worries over earnings, and a potential spillover from Russia’s war in Ukraine.
“We don’t see a major catalyst in the near term,” for China stocks, though earnings results may create some share price volatility, said Marvin Chen, a strategist at Bloomberg Intelligence. “For a material re-rating of China tech, we may need to see a shift in regulatory tone, and we didn’t get that from the recently concluded NPC meeting ” he said, referring to the National People’s Congress.
China’s benchmark CSI 300 index fell as much a 1.9% on Monday, having ended last week with 4.2% losses in the worst NPC performance since 2008.
Both Hang Seng Tech Index and the Nasdaq Golden Dragon Index have lost more than 60% from their peaks, respectively. Alibaba (NYSE:BABA) Group Holdings Ltd. sank more than 5% while Tencent Holdings (OTC:TCEHY) Ltd., which is headquartered in Shenzhen, was down 4%.
Goldman Sachs Group Inc (NYSE:GS). strategists toned down their optimism on China stocks, slashing their valuation estimates.
“We stay overweight China on well-anchored growth expectations/targets, easing policy, depressed valuations/sentiment, and low investor positioning,” but lower our valuation target from 14.5 times to 12 times on changes in the global macro environment and higher geopolitical risks, strategists including Kinger Lau wrote in note dated Monday.
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