Alibaba, Tencent, Baidu: Hang Seng Tech Index down 30% on US delisting fears

By: Michael Harris
Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to… read more.
on Mar 28, 2021
  • Tens of billions of dollars in market cap have been wiped out in Chinese dual-listed tech stocks
  • The massive losses come as a result of potential de-listings of those companies from U.S. stock exchanges
  • The Hang Seng Tech Index closed the week almost 5% lower to increase monthly losses to 9.2% on SEC fears

The Hang Seng Tech Index (HKG: 700), which represents the 30 largest technology companies listed in Hong Kong, is trading about 30% lower from the record highs set last month as the U.S. Securities and Exchange Commission (SEC) started rolling out a law to delisted Chinese companies that fail to meet US accounting standards.

Fundamental analysis: Chinese dual-listed tech companies lose $60 million in market cap in three days

In just a few days, billions of dollars in market cap have been wiped out in Chinese dual-listed internet giants including Alibaba, Baidu, Tencent, JD.com, and Netease.

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The massive losses come as a result of potential de-listings of those companies from U.S. stock exchanges. The collective market value of these tech giants has dropped by 468.64 billion Hong Kong dollars (about $60.31 billion) in only three days as of Friday’s close in Hong Kong.

Chinese search engine giant Baidu has made a rather dull public debut in its secondary listing in Hong Kong on Tuesday, where the company’s shares ended the day relatively flat. The SEC passed a law Wednesday to delist companies from U.S. stock exchanges if they do not meet U.S. auditing standards. 

The legislation is named the Holding Foreign Companies Accountable Act and was passed under the administration of former U.S. President Donald Trump. The SEC will identify specific companies that will then be audited by a U.S. regulator who will ask for evidence that those companies are not owned or managed by a government entity in a foreign jurisdiction. 

Furthermore, companies will be required to identify any board members who are Chinese Communist Party officials, according to the SEC’s statement. Chinese tech companies are also facing a crackdown at home as Beijing establishes anti-monopoly acts in the fintech and e-commerce sectors.

Technical analysis: Sharp move lower

The Hang Seng Tech Index closed the week almost 5% lower to increase monthly losses to 9.2% on SEC fears. The index was trading over 10% lower at one point to record the lowest level recorded since November last year.

Hang Send weekly chart (TradingView)

The Hang Seng Tech Index came close to tagging the 78.6% retracement line at 7600 before the bulls staged a quick rebound in price to push higher to above the 8000 handle. Intraweekly resistance is located at 8500 while the ascending supporting trend line comes in at 7400 should the pullback extend. 

Summary

Chinese dual-listed companies have together lost billions of dollars in market capitalization in just three days to send the Hang Seng Tech Index sharply lower. Those companies include Alibaba, Baidu, JD.com, and Netease.

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