Tech leads slump in Chinese stocks on earnings, Trump risks

(Bloomberg) — Chinese tech stocks listed in Hong Kong extended their slump from a high in October to about 20%, as investors reduced positions amid rising geopolitical risks and caution toward earnings.

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The Hang Seng Tech Index (HSTECH.HK) dropped 3.2% on Thursday, with JD.com Inc and Xiaomi Corp among the top contributors to the gauge’s slide. The sector’s weakness weighed on a broader benchmark of Chinese shares listed in Hong Kong, which fell 2.2%.

Chinese stocks have faced renewed selling pressure as US President-elect Donald Trump’s cabinet starts to take shape, with those critical of Beijing set to take key posts. That has heightened fears that Sino-American tensions will escalate under the new administration. There’s also caution ahead of earnings from tech heavyweights JD.com later Thursday and Alibaba Group Holding Ltd. (BABA) on Friday, which will shed light on the strength of China’s consumption.

“Investors are reducing their risk exposure before going into earnings, and there are also worries about Trump and profit taking from the stimulus-driven rally,” said Vey-Sern Ling, managing director at Union Bancaire Privee.

Shares of Tencent Holdings Ltd. closed 0.1% lower in Hong Kong, erasing an 2.8% gain, even after it delivered a better-than-anticipated 47% surge in profit for the September quarter. Tencent kicked off a closely-watched earnings season for major tech companies, just as Beijing’s government unleashes a basket of policy stimulus from rate cuts to debt swaps to reflate the economy.

China Tech Stocks Need Earnings Boost Amid Trump, Macro Threats

The slump in Chinese tech stocks shows how fast sentiment can turn if investors’ expectations aren’t met. The Hang Seng Tech gauge rallied more than 55% in about a month through Oct. 7 as part of a broad rally fueled by China’s monetary stimulus blitz, before losing momentum as follow-up measures failed to impress.

In the onshore market, the CSI 300 Index closed down 1.7% in its biggest one-day loss since Oct. 15.

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