(Bloomberg) — Chinese technology shares listed in Hong Kong trimmed an earlier advance after local media reported that cooperation had been suspended between an Alibaba Group Holding Ltd. unit and a government agency.
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The Hang Seng Tech Index was up 0.6% shortly after the lunch break, paring a 2.5% advance. Alibaba wiped out nearly all of its initial gains after the 21st Century Business Herald reported that the company’s cloud computing unit was temporarily suspended as a partner of the Ministry of Industry and Information Technology’s internet security program because it failed to report a bug in time.
“Investors have been fretting over Alibaba’s fundamentals as there’s limited room for growth for its e-commerce business,” said Linus Yip, a strategist at First Shanghai Securities. “The cloud business, although making up a small portion of its revenue, is one of the few bright spots.”
Shares of China’s biggest live-streaming and e-commerce platforms also pared an earlier rebound, after being battered on Tuesday due to an unprecedented tax evasion fine the government imposed on a top online influencer. Kuaishou Technology swung to losses of as much as 0.8%, becoming the biggest drag on the tech measure, after advancing as much as 5.4%. Bilibili Inc. trimmed an initial climb of as much as 8.3%.
Sentiment for tech shares is fragile globally, with interest rates set to rise. Jitters are even more apparent in Hong Kong, where the sector remains marred by regulatory uncertainty.
Golden Dragon
Still, the Hang Seng Tech Index was on track for a second daily rise as traders rushed to unwind short bets ahead of the year-end holidays, taking cues from a 7% advance in the Nasdaq Golden Dragon China Index overnight.
Thin liquidity is also exacerbating market swings, with trading of Hang Seng Tech Index members shares at about 30% of the daily average this year at the time of writing.
“I don’t think a short term bounce like this is very meaningful in guiding decisions — it’s all sentiment,” said Shi Yifan, a senior analyst at Shenzhen Right Investment Management Co. “There’s no question that they are undervalued, but the outlook is still unclear, so I’m still waiting for the right timing.”
(Updates throughout.)
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