Tencent Slumps to Lead China Tech Selloff as Volatility Climbs

Updated on
  • Tencent rally had helped lift Hang Seng Index this year
  • Great Wall Motor surges in pain trade for short sellers

Tencent Holdings Ltd. led declines by technology shares in Hong Kong after Friday’s tumble by U.S. peers sparked concern that recent gains were excessive.

Tencent and AAC Technologies Holdings Inc. were among the biggest losers on Hong Kong’s benchmark stock index, falling at least 2 percent at the close. The Hang Seng Index slid 1.2 percent for its largest retreat in almost two months, as a gauge of expected volatility jumped the most since November. Great Wall Motor Co., the most shorted stock in Hong Kong, climbed 21 percent. The Shanghai Composite Index slipped 0.6 percent.

The S&P 500 technology index plunged 2.7 percent Friday as companies from Apple Inc. to Nvidia Corp. tumbled. Hong Kong’s stock market has become increasingly reliant on Tencent, which surged 46 percent this year through Friday to add more than $100 billion in value to its shares. China’s largest Internet company accounted for a quarter of the Hang Seng Index’s gain in 2017.

“Investors have turned more cautious about the tech sector after increased short-selling activities and some stocks’ valuations looking a bit stretched following a rally,” said Linus Yip, a strategist at First Shanghai Securities in Hong Kong. “The Nasdaq rout was a trigger for investors to take profit from the technology sector.”

Read also: High-Flying Asian Markets Exposed After FANG Selloff in U.S.

The Hang Seng China Enterprises Index lost 1 percent, while the Shenzhen Composite Index fell 1.1 percent after its best week in a year.

  • A gauge of expected volatility climbed after falling to its lowest level since 2005 on Friday.
  • AAC Technologies slumped 3.8% for its biggest loss since May 18. The company’s shares have turned volatile after being targeted by a short seller. Tencent retreated 2.5%.
  • China Vanke Co. climbed 4% in Shenzhen to reach its highest level since Jan. 13. China Evergrande Group agreed to sell about a 14.1 percent stake in Vanke for 29.2 billion yuan ($4.3 billion).
  • Great Wall rose the most since November 2008. Short interest in Great Wall’s Hong Kong-listed shares was at 14 percent as of June 8, data from IHS Markit Ltd. show, the most among 475 members of the Hang Seng Composite Index. Credit Suisse Group AG raised its rating to outperform and lifted its price target.
  • Chinese brokerages listed in Hong Kong slid as a slowing pace of IPO approvals by the regulator threatens their income. Haitong Securities Co. fell 2.9% to lead declines on the H-share gauge, while Huatai Securities Co.’s 2.7% drop was its biggest since March 22.

— With assistance by Sofia Horta E Costa

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