Tencent Leads China Tech Selloff as Earnings Worries Mount

(Bloomberg) -- Chinese tech stocks slumped as weak corporate earnings coupled with a dimming global growth outlook intensified selling.

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The Hang Seng Tech Index closed 4% lower on Thursday, with Alibaba Group Holding Ltd. and Tencent Holdings Ltd. and weighing the most. The latter tumbled 6.5% after the tech behemoth reported its slowest revenue gain since going public in 2004. Xiaomi Corp. also fell ahead of its earnings release later in the day.

READ: Tencent Plunges After Warning Tech Crackdown Won’t End Quickly

Thursday’s rout tracks a global selloff, sparked by disappointing earnings from US consumer stalwarts that suggested an economic downturn may be on its way. For China tech, top officials’ repeated commitments to support the battered sector -- the latest from Premier Li Keqiang late Wednesday -- have lacked the firepower to lift shares. Tencent executives said it will take time for Beijing’s promises to translate into action.

“Tencent’s results suggest growth will be slower for longer, so the read through to the rest of China’s consumer facing technology companies is negative from a fundamental perspective,” said Vey-Sern Ling, a senior analyst with Union Bancaire Privée. “However, there are reasons to be more optimistic in the second half given the increasing supportive signals from senior levels of the government.”

A gauge of Chinese stocks trading in the US fell 2.5% on Wednesday.

Weighing broadly on Chinese stocks are new lockdowns following fresh Covid-19 outbreaks in key cities. Policy makers have shown little signs of letting up on a Covid Zero policy even as the damage to economic growth and businesses becomes more evident.

On the mainland, the CSI 300 Index reversed earlier losses to edge 0.2% higher. Hong Kong’s benchmark Hang Seng Index slid 2.5%.

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