Chinese tech stocks have fallen harder than their U.S. counterparts

Hang Seng Tech Index – which tracks 30 companies including Chinese internet giants Tencent Holdings Limited.

TCEHY -5.79%

and Alibaba Group Holding Ltd., and smartphone maker Xiaomi Corp.

1810 -1.79%

– closed Tuesday at its lowest level in 2021 and is now in a bear market range, defined as a decline of at least 20% from recent highs.

In comparison, the Nasdaq Composite on Monday closed 10.5% below its recent index high on February 12.

Money managers say the impetus for the U.S. and Asian market downturn was similar: an unexpectedly rapid rise in Treasury bond yields, which made stocks of fast-growing companies so attractive and led some investors move from technology to banking, energy and other less. volatile stocks. China’s big tech players have been hit harder, as a flood of money from investors on mainland China has pushed their stock prices and valuations sharply.

“It’s hard to call the coin, but we see this as a healthy correction, and the market was expected for one,” said Nicholas Yeo, who heads China shares at Aberdeen Standard Investments in Hong Kong. . He said the long-term growth outlook for the country’s internet and technology giants remains intact but that their stocks are at risk of major changes as they were among the key beneficiaries of excessive liquidity in the markets at the time of the coronavirus pandemic.

Just a month ago, Meituan, a Beijing-based company that runs a popular app for buying, delivering food and tickets, was flying high as the third most valuable company in China, with a market capitalization of more than $ 300 billion. Investors ’enthusiasm for Meituan’s recent expansion into buying supermarkets in China has caused a rapid run in its shares, even though the company is only generating a small profit.

Meituan has been one of the biggest casualties of recent sales, having cut its value by a third since February 17. The stock was one of the most popular purchases by investors on mainland China uses the Stock Connect trading link to list stocks in Hong Kong. Streams out through that connection have recently been built.

An army of individual investors who have become more active users of mobile trading apps has also been picking up market sizes.

As a result, “When things start to go up, they go up very quickly. But when they start going down, the whole thing turns out quickly too, ”said Wei Wei Chua, portfolio manager at Mirae Asset Global Investments in Hong Kong. He said his company has moved into cyclical financial names, such as insurers, and defense theaters, such as utilities.

Ken Peng, head of Asia-Pacific investment strategy at Citi Private Bank, said as the world gradually recovers from the coronavirus pandemic, technology stocks could fall out of favor with investors. “There will be less demand for technology,” he said, “and more demand for leaving your home.”

Many individual investors suffered losses in the quick sale. Huang Xiaohu, a 35-year-old technology entrepreneur in Shenzhen, benefited earlier from the strong trade debate at Kuaishou Technology,

operator of a popular short video app in China. After selling shares he received in the company’s original public offering, he decided to buy back after a recent dive, but the shares continued to fall, and he is sitting on a paper loss. equivalent to over $ 10,000.

“I don’t want to talk about stocks anymore. My heart is broken, ”said Mr Huang, who owns Alibaba shares listed in Hong Kong, with a paper loss of around 20%. He said he plans to keep both stocks in hopes of recovering.

Write to Xie Yu at [email protected] and Joanne Chiu at [email protected]