Investors around the world expressed skepticism about Xi Jinping’s third term in office, which saw the sale of shares in Chinese companies after the country’s leader closed a Communist Party congress that signaled a shift in focus from the economy to security. meant.
The sell-off began Monday morning in Asia, where the Hong Kong Hang Seng Tech Index fell 9.7 percent, its second-largest one-day decline. It continued into trading day in the US, where several of the most well-known Chinese technology groups listed on Wall Street fell sharply.
Nasdaq’s Golden Dragon index, which tracks US stocks in Chinese companies, fell 14.4 percent as Alibaba, JD.com and Pinduoduo faced heavy sales. The record one day drop for the index resulted in a fall of about 50 percent this year.
Analysts said the sell-off was exacerbated by Beijing’s release of economic data, which was delayed while the party congress was underway, which showed China’s economy grew 3.9 percent year-on-year in the third quarter, below the government’s annual target of 5.5 percent.
But they also noted that Xi’s overhaul of party leadership at the week-long 20 party congress, which ended over the weekend, had given power to loyalists more concerned about China’s geopolitical rivalry with the US than about economic reforms.
“The risk is more about groupthink and capturing thoughts and the line on the urgent need to grapple with the US,” said Gerard DiPippo, a former senior Chinese economics analyst at the CIA. “It’s reasonable from a market perspective that whatever hopes you might have had for a liberal turn in China, it’s probably lower now than it was on Friday.”
In the months leading up to the party congress, Xi had shown growing disdain for economic reform and enforced strict Covid-19 lockdowns despite their impact on China’s economy. He has also launched a regulatory crackdown against some of the country’s fastest-growing tech groups.
“Chairman Xi clearly wanted a team to carry out his vision,” said a US industry director.
Frank Benzimra, head of Asia equity strategy at Société Générale, said investors were alarmed by the shift in membership of the party’s top leadership body announced Sunday, which was packed with cadres focused more on national security than economic reform. .
“While Chinese politics has long been opaque, this sharp consolidation of power is adding to investor unease,” said Mark Haefele, chief investment officer of UBS’s Global Wealth Management. “Stock valuations, already close to a 10-year low, are likely to come under more pressure as international investors demand a higher risk premium.”
One of the biggest company names to suffer from the sell-off was Alibaba, which closed 12.5 percent lower in Wall Street trading, pushing its shares below the $68 offering price it made eight years ago in New York. went into what was on the stock exchange. time the world’s largest listing.
The company has increased its revenues more than 14 times and doubled adjusted profits in the years since its market debut. But shares have been sliding since 2020 after Beijing canceled the IPO of digital payments affiliate Ant Group, which should have raised a record $37 billion.
Alibaba’s 80 percent decline over that period reflects a loss of approximately $670 billion in stock market value. The tech company reported its first quarterly revenue decline since its New York listing in August.
Monday’s shakeout highlights the mounting challenges facing China’s biggest tech groups since Xi launched a crackdown on the sector.
An Alibaba employee said the government’s technical crackdown and falling stock price had undermined “drive and energy”.
“In the past one to two years, people have stopped working hard,” the person said, noting that they personally worked about 20 hours less per week.
Alibaba’s filings also show that the company has lost more than 13,000 positions since the beginning of the year.
Additional reporting by Nian Liu in Beijing, Patrick Mathurin in London and Eric Platt in New York