China’s tech stocks took a hit on Wednesday, driven by concerns over the country’s consumption outlook following Walmart Inc.’s decision to sell its stake in JD.com Inc. and disappointing earnings reports from key players. The Hang Seng Tech Index fell by 2.1% as of 11:20 a.m. local time, led by a sharp 12% drop in JD.com shares. Kuaishou Technology also saw a significant decline of more than 10% due to underwhelming advertising revenue, while XPeng Inc. slipped over 5% before slightly recovering, as its revenue guidance missed expectations.
This market retreat has rattled investors, cutting short a two-week rebound in Chinese stocks that had managed to withstand a broader global equity downturn. The recent earnings reports from major tech companies have been mixed at best, and Walmart’s unexpected move to sell its JD.com stake has heightened concerns over foreign investment in China, where economic recovery remains uncertain.
Steven Leung, executive director at UOB Kay Hian Hong Kong Ltd., noted that Walmart’s stake sale in JD.com is impacting the sentiment across the entire sector. “The market is worried that foreign capital, especially from long-term holders, might begin to retreat. Mainland and local money alone may not be enough to support a significant stock recovery,” Leung said.
JD.com shares had rallied 13% through Tuesday, following better-than-expected revenue and earnings for the second quarter. However, the overall performance of tech earnings has been underwhelming.
Vipshop Holdings Ltd., an online discount retailer based in China, saw its shares plunge 18% in the US on Tuesday after its revenue outlook for the third quarter missed estimates. This followed similarly disappointing results from Alibaba Group Holding Ltd. and Tencent Holdings Ltd., which failed to ease concerns over weak consumer spending in China.
Walmart’s decision to sell its stake in JD.com also underscores the risks associated with buying dips in China’s e-commerce stocks. Short-term rallies could prompt major shareholders to reduce their holdings, as seen in this case.
Vey-Sern Ling, managing director at Union Bancaire Privee in Hong Kong, suggested that while the market might interpret Walmart’s stake sale as a sign of declining confidence in Chinese consumption, it is more reflective of broader, well-known concerns. “It’s not something new or unknown,” Ling added.
