Major China tech stocks plunge as sell-off builds

Shares in Chinese tech giants plunged on Thursday morning after Tencent reported lacklustre profits, fuelling wider concerns for a grim earnings season as China’s economic outlook worsens.

Tencent’s Hong Kong-listed shares plunged more than eight percent in early trading before paring losses slightly, a day after it posted its slowest revenue gain since going public in 2004.

Tech behemoth Alibaba dropped more than six percent, while Baidu and Xiaomi were both down.

Tencent’s revenue came in at 135.5 billion yuan ($20.1 billion) for the three months ended March, putting year-on-year growth at nearly zero and setting a record low for the company’s quarterly revenue gain. Xiaomi is expected to report first-quarter results later on Thursday, while Alibaba and Baidu will do so next week.

The sell-off came despite Chinese leaders recently hinting that an 18-month regulatory crackdown on the tech sector may ease. Premier Li Keqiang on Wednesday expressed support for digital-economy companies and their public listings, according to state broadcaster CCTV.

But in a conference call with reporters after announcing the results, Tencent president Martin Lau warned that Beijing’s latest show of support for the tech sector would take time to bear fruit.

“We can clearly see that from the most senior level, there’s a pretty clear signal of support released. But for this to translate into real impact on our business, there is going to be a time lag,” Lau said, according to Bloomberg.

“It would take the specific regulators and ministries to translate this direction into real action.”

“The process of confidence building... will take time,” said Rajiv Biswas, Asia-Pacific chief economist at S&P Global Market Intelligence.

This is due to “the past two years of regulatory uncertainty for China’s tech sector, including significant regulatory penalties upon some of China’s largest tech firms”, he told AFP.