Chinese technology shares in Hong Kong fell after local media reported that cooperation between an Alibaba Group Holding Ltd. company and a government agency had been stopped.
The Hang Seng Tech Index rose 0.6 percent just after the lunch break, reversing a 2.5 percent gain. Alibaba lost nearly all of its early gains after the 21st Century Business Herald reported that the company’s cloud computing unit had been temporarily suspended as a partner in the Ministry of Industry and Information Technology’s internet security program for failing to report a bug in a timely manner.
“Investors have been concerned about Alibaba’s fundamentals because its e-commerce business has limited opportunity for development,” said Linus Yip, a strategist at First Shanghai Securities. “The cloud business, while accounting for a modest amount of the company’s revenue, is one of the few bright spots.”
Shares of China’s largest live-streaming and e-commerce platforms also pared an earlier bounce, after being pummelling on Tuesday by a government-imposed tax evasion fine on a popular online influencer. After gaining as high as 5.4 percent, Kuaishou Technology swung to losses of up to 0.8 percent, becoming the biggest drag on the tech index. Bilibili Inc. reduced an initial gain of up to 8.3 percent.
With interest rates poised to climb, worldwide sentiment for technology stocks is shaky. The jitters are much more visible in Hong Kong, where the sector is still plagued by regulatory uncertainty.
The Golden Dragon
Nonetheless, the Hang Seng Tech Index was on track for a second daily gain as traders rushed to unwind short positions ahead of the year-end holidays, drawing cues from the Nasdaq Golden Dragon China Index’s 7% gain overnight.
Thin liquidity is further amplifying market volatility, with Hang Seng Tech Index members’ shares trading at around 30% of the daily average this year at the time of writing.
“I don’t think a short-term bounce like this is really relevant in directing decisions — it’s just mood,” Shi Yifan, senior analyst at Shenzhen Right Investment Management Co., said. “There is no doubt that they are discounted, but the outlook remains uncertain, so I’m still waiting for the perfect opportunity.”