China's Tech Giants Dive on Concerns Over Consumption Slowdown, U.S. Regulations
March 11 2022 - 12:16AM
Dow Jones News
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 yifan.wang@wsj.com
(END) Dow Jones Newswires
March 11, 2022 00:01 ET (05:01 GMT)
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