The worldwide slump in technology stocks deepened yesterday, with investor angst over inflation and stretched valuations adding to fresh signs of regulatory scrutiny in China.
Losses in Taiwan Semiconductor Manufacturing Co (台積電) and Samsung Electronics Co helped send MSCI Inc’s gauge of Asian tech stocks to its biggest drop since Feb. 26, while futures on the NASDAQ 100 slumped in Asia, after the underlying index’s 2.6 percent slide on Monday.
The Hang Seng Tech Index sank as much as 4.5 percent, extending its tumble from a February high to about 30 percent.
Photo: AFP
Meituan (美團) drove declines after the Chinese e-commerce giant’s business practices were criticized by an influential consumer advocacy group, just days after the company’s chief executive Wang Xing (王興) shared and then deleted a poem on social media that some interpreted as a veiled criticism of Beijing.
Global technology stocks benefited from lower interest rates and emerged as investor favorites last year, when the COVID-19 pandemic stoked demand for online services, but concern is mounting that commodity-fueled inflation would prompt central banks to tighten monetary policy, denting the appeal of stocks whose valuations often hinge on earning prospects far into the future.
With the NASDAQ 100 trading within 5 percent of its all-time high last month, some investors see a window to take profits.
Investors “continue to place their focus on the inflation narrative, with rising commodities prices and chip shortages in play,” IG Asia Pte market strategist Yeap Jun Rong said. “Concerns of higher inflation might weigh on growth stocks, considering that much of their value might come from future earnings.”
Yesterday’s tech rout weighed heavily on the broader equity market, with the MSCI Asia Pacific Index slipping about 2 percent and heading for its lowest close since March 31.
MSCI’s broadest measure of world equities fell for a second day. That is after hitting another record just last week, after surprisingly weak US jobs data eased some fears about inflation and a cutback in stimulus.
“Investors’ tendency to look at just the good side of things is quickly fading,” said Shogo Maekawa, a strategist at JPMorgan Asset Management in Tokyo. “People were inclined to buy technology stocks even after weak US jobs data on the view that any exit in monetary policies is far away. But now, a deep-rooted concern over inflation is leading to declines in technology stocks.”
Chinese tech giants have borne the brunt of the sector’s retreat this month, after regulators expanded an antitrust crackdown and announced steps to rein in the companies’ fast-growing finance units.
Meituan’s stock price yesterday plunged as much as 8.7 percent, taking the slump over two days to 15 percent after the Shanghai Consumer Council released criticism late on Monday on issues that hurt consumer rights.
The council blasted Meituan over refunding problems and misleading content on its mobile app.
The firm said that it would soon submit a rectification report.
“So many headwinds still persist in the Chinese technology sector,” Jackson Wong (黃志陽), asset management director at Amber Hill Capital Ltd (安山資本), said by telephone. “The policy worry is not just about Meituan. Tech regulations just keep coming in China. The lingering regulatory risk makes forecasting the sector’s growth really, really difficult.”
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