Why is China cracking down on its tech companies?
Is Tencent going to end up like Alibaba?
Due to growing concerns that Beijing may impose additional restrictions on private industry, Chinese technology stocks have dropped the most in two days since July.
On Monday, Tencent Holdings Ltd.’s stock dropped 5.2 percent, dragged down by rumors of an undisclosed upcoming crackdown on China’s largest social media and gaming giant, which was subsequently rejected by company spokesperson Zhang Jun.
Traders cited anything from authorities’ weekend warnings about frauds in the metaverse — a virtual-reality-based social media idea — to speculation about more significant gaming industry restrictions.
Without going into detail, Zhang stated that the web rumors were false.
Furthermore, after markets closed, Chinese officials instructed the country’s largest state-owned companies and banks to begin a new round of inspections on their financial exposure and other relationships to Jack Ma’s Ant Group Co., according to Bloomberg.
Before the announcement, Alibaba Group Holding Ltd., which owns a third of Ant, plummeted 3.9 percent.
“The market is quite concerned that there will be additional crackdowns,”
“This might leave technology companies with very little room to turn around their operations.” “The market’s anxieties suggest that the market is concerned that tech businesses will not be able to scale up a new business as quickly as they did in China in the past.” That’s putting a damper on an already unstable mood.”
said Castor Pang, head of research at Core Pacific-Yamaichi.
When some of the largest internet companies report profits in the coming weeks, investors will learn just how much the crackdown has hurt their profitability.
Alibaba will release its earnings report on Thursday.
