(Bloomberg) -- China’s tech stocks slumped on concerns over the country’s consumption outlook following Walmart Inc.’s plan to sell its stake in JD.com Inc. and poor earnings from key players.
The Hang Seng Tech Index was down 2.1% as of 11:20 a.m. local time, led lower by a 12% plunge in JD.com. Kuaishou Technology also slumped more than 10% on disappointing advertising revenue. XPeng Inc. slipped more than 5% before trimming losses, as the electric vehicle maker’s revenue guidance fell short of estimates.
Wednesday’s retreat is putting investors on edge once again, cutting short a two-week rebound during which Chinese shares withstood a global equity rout. The latest earnings from tech giants have been mixed at best, and Walmart’s withdrawal is stoking bigger concern over foreign investments as China’s economic recovery remains elusive.
The stake sale of JD.com “affects the sentiment in the whole sector” as the market is concerned whether foreign capital, especially those long-term holders, will start retreating, said Steven Leung, executive director at UOB Kay Hian Hong Kong Ltd. “Mainland and local money will not be sufficient to support any meaningful stock recovery.”
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JD.com shares in Hong Kong rallied 13% through Tuesday since the Chinese e-retailer’s revenue and earnings beat estimates for the second quarter. However, overall tech earnings have been far from impressive.
Vipshop Holdings Ltd., a China-based online discount retailer, plunged 18% in the US on Tuesday as revenue outlook for the third quarter missed estimates. That’s after results from Alibaba Group Holding Ltd. and Tencent Holdings Ltd. failed to assuage concern over China’s anemic consumption spending.
Walmart’s surprising stake sale plan also underscores the risk of dip buying China’s e-commerce stocks, as any short-term rally can be a trigger for big shareholders to trim holdings.
“The market might read it as Walmart having a negative view on Chinese consumption, but really it’s not something new or unknown,” said Vey-Sern Ling, managing director at Union Bancaire Privee in Hong Kong.