Impact of Trade War Volatility Hurts China’s Tech Stocks
China-based TenCent, which owns the country’s popular WeChat social-messaging app, became the latest victim of investor disenchantment when its shares on the Hong Kong stock exchange plummeted by 5%. The latest decline has wiped out $175 billion of the company’s value since the beginning of the year—a trend that has hit nearly every emerging tech company but Amazon and Apple.
As CNBC.com put it, “that’s like losing a whole Netflix” or two Goldman Sachs. The stock hit a high of $474.6 in Hong Kong dollars in January, but has dropped to $325 Thursday.
According to The Wall Street Journal, shock reverberated among equity research analysts on Wall Street at the drop, since most had a “buy” recommendation on the stock. According to FactSet, TenCent recently traded 32% below its average target price. An investor information website, FactSet.com predicted the potential of a tech bubble as early as 2014. This year, tech investors are hearing the pop.
The trade war between the U.S. and China has helped to cause of the drop in Chinese stocks because of fears that it could impact the growth of their companies. In addition, the Chinese government has cracked down on revenues from the source of 40% of the company’s revenues, online games, which it is now closely regulating, according to Bloomberg.