China Tech Stocks Slide as Regulators Ramp Up Pressure on Gaming

(Bloomberg) — Technology stocks led declines in Chinese shares after regulators warned gaming companies against focusing solely on profit, underscoring the market’s continued vulnerability to policy risks.

The Hang Seng Index fell as much as 1.4%, extending declines to a second day, with Tencent Holdings Ltd. dropping as much as 4.6%. Hong Kong’s tech gauge also tumbled, marking a pause in the rebound from its August low, led by declines of more than 6% in NetEase Inc., Kuaishou Technology and Bilibili Inc.

Thursday’s pullback comes after regulators de-emphasized profits when they summoned officials from companies including Tencent and NetEase and warned them of the need for stricter oversight of game promotion.

“This demonstrates the risk for those attempting to call the bottom with so much uncertainty still hanging,” said Bloomberg Intelligence analyst Matthew Kanterman. “I don’t think the overnight news is a big departure from that which we already knew, but the reaction clearly signifies the skittishness of investors around any regulatory news.”

The declines in stocks comes after weeks of buying by bargain hunters, which had delivered a tentative rebound in the tech sector. While the Hang Seng Tech Index has jumped about 13% from its Aug. 20 low, it is still nearly 40% below its February peak.

Contact editor Michael Bellart (michaelbellart@caixin.com)

Download our app to receive breaking news alerts and read the news on the go.

Get our weekly free Must-Read newsletter.