Chinese stocks fell on Monday as the threat of new Covid restrictions and a renewed regulatory offensive against big tech companies sapped investor confidence.
Casinos in the gambling hub of Macao were ordered to close for the first time since February 2020 because of a Covid outbreak, sending shares of their operating companies plunging, and fears of new lockdowns in Shanghai undermined the broader China market.
Adding to the downbeat mood, China’s tech stocks plunged after the country’s antitrust regulator imposed fresh fines on a batch of A-list companies, rekindling fears that Beijing is still not lifting the pressure on the country’s embattled internet giants.
Top government officials had recently signaled an easing of President Xi Jinping’s bruising tech crackdown, and pledged support for the internet sector. The change in rhetoric fueled hopes that Beijing would support the private sector in helping to rescue growth at a time when China’s economic outlook is weak.
But the latest move from the top market regulator sparked a fresh stock sell-off.
Late Sunday, the State Administration for Market Regulation said it had fined a number of technology companies for violating anti-monopoly rules on the disclosure of transactions. The watchdog released a list of 28 mergers and acquisitions involving Tencent, Alibaba, Bilibili, Sina Weibo, Lenovo’s parent company Legend Holdings, and Ping An Health, that it said had not been reported to the regulator.
Shares of Alibaba (BABA) sank 5.8% in Hong Kong on Monday. Tencent (TCEHY) tumbled 2.9%. The Hang Seng Tech Index was down about 4%.
The losses were part of a broad drop in Chinese stocks. The top loser among Asia’s major indexes was the Hang Seng Index — down 2.8%. China’s Shanghai Composite Index fell 1.3%.
Macao casino stocks declined across the board after the city’s government ordered a week-long lockdown of most business operations, including cinemas, bars, and public swimming pools. Melco International Development plummeted 7.1%. Sands China (SCHYF) lost 8.2% and Galaxy Entertainment (GXYEF) sank 4.9%.
Fears of new restrictions in Shanghai also weighed on the market, said Stephen Innes, managing partner for SPI Asset Management.
Several Chinese cities have imposed new curbs after discovering cases involving the new Omicron BA.5 subvariant. Shanghai, which had just recently emerged from a two-month lockdown, identified its first BA.5 variant case on Friday and will perform two rounds of Covid tests between July 12 and July 14, a health official said on Sunday.
So far, 31 Chinese cities are under full or partial lockdowns or implementing strict mobility restrictions, affecting 247.5 million people, according to estimates by Nomura published on Monday.
“Later this week (July 15), China will release Q2 GDP and June activity data, which will be scrutinized for the extent of economic recovery following the restrictions earlier in the quarter,” Innes said.
Property shares sold off. Embattled Evergrande’s onshore bondholders rejected a plan by the company to further delay its debt payment beyond a July 8 deadline, according to a filing by the developer on Monday.
Country Garden plunged 8%. Longfor Properties and Vanke Real Estate declined 7% and 5.5% respectively.
In Hong Kong, shares of China’s largest chipmaker — SMIC — lost 2.3% after Reuters reported that the Biden administration is considering banning exports of chipmaking tools to China. ASM Pacific Technology dropped 1.1%.
