(Bloomberg) — Shares of Chinese technology companies slumped on concerns about the country’s consumption outlook after Walmart Inc. agreed to sell its stake in JD.com Inc. and major players reported weak earnings.
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The Hang Seng Tech Index was down 2.1% at 11:20 a.m. local time, led by a 12% slump in JD.com. Kuaishou Technology also slumped more than 10% on disappointing advertising revenue. XPeng Inc. slipped more than 5% before paring losses as the electric vehicle maker’s revenue forecast fell short of expectations.
Wednesday’s pullback sends investors into renewed panic mode, ending a two-week rally in which Chinese stocks had withstood a global rout. The tech giants’ recent gains have been mixed at best, and Walmart’s pullback stokes concerns about foreign investment as China’s economic recovery remains elusive.
The sale of JD.com shares “affects sentiment across the sector” as the market worries about whether foreign capital, especially from long-term investors, might pull out, says Steven Leung, managing director of UOB Kay Hian Hong Kong Ltd. “Mainland and local money will not be enough to support a meaningful recovery in share prices.”
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Shares of JD.com in Hong Kong rose 13% through Tuesday after the Chinese e-retailer’s second-quarter revenue and profit beat expectations, but the tech companies’ overall earnings were less than impressive.
Vipshop Holdings Ltd., a China-based online discount retailer, plunged 18 percent in the U.S. on Tuesday as its third-quarter sales forecast fell short of estimates. This came after results from Alibaba Group Holding Ltd. and Tencent Holdings Ltd. failed to allay concerns about China’s weak consumer spending.
Walmart’s surprise plan to sell shares also underscores the risk of downside for Chinese e-commerce stocks, as any short-term rebound can be a trigger for major shareholders to reduce their holdings.
“The market might interpret it as if Walmart has a negative view of Chinese consumption, but in reality it is nothing new or unknown,” said Vey-Sern Ling, managing director of Union Bancaire Privee in Hong Kong.
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