China's Tech Giants Dive on Concerns Over Consumption Slowdown, U.S. Regulations

   By Yifan Wang 
 

Shares of China's largest tech companies dived Friday, extending a steep overnight selloff on Wall Street following renewed concerns over China's slowing consumption and the potential risk of U.S. delistings.

JD.com took the hardest hit, with shares slumping as much as 18% by midday, after the e-commerce giant, in its latest earnings call late Thursday, guided for macroeconomic pressures on China's retail sector in early 2022 amid rising raw-material prices and recent local Covid-19 outbreaks.

The company's weak user growth in the fourth quarter, when net user additions dropped to a two-year low, likely intensified market concerns, Citi said in a note Thursday as it cut its target price on JD.com to $99 from $109.

Several other banks and brokerages followed suit. Nomura reduced its target to $85 from $90, while brokerage Bocom International trimmed its target to $100 from $104. But all these institutions keep a buy call JD.com's stock, citing generally solid fourth-quarter earnings and sales growth momentum above the industry average.

Losses spread to other Chinese internet giants, as Alibaba Group Holding Ltd. fell 6.6%, Tencent Holdings Ltd. dropped 5.6%, Meituan lost 11% and Kuaishou Technology slumped 12%.

Sentiment on the sector took a further blow after the U.S. Securities and Exchange Commission put up a provisional list of five companies that could be delisted if they don't measure up to U.S. accounting standards.

While the preliminary list doesn't include industry heavyweights such as Tencent and Alibaba, the SEC's move was "another scare" for investors in U.S.-listed tech stocks due to "worries that more companies will be put on the list in the coming months," Citi said.

However, the bank said any real risk of Chinese companies' American depositary shares being delisted likely wouldn't materialize until 2024-2025 given the current regulatory requirements.

"We suggest buying big-cap ADRs that already have dual listing in Hong Kong," Citi said.

Write to Yifan Wang at [e-mail]

(END) Dow Jones Newswires

March 11, 2022 00:01 ET (05:01 GMT)

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