Hang Seng Tech Index drops 1.46% on Beijing regulatory warning

Hong Kong's tech benchmark fell for a second session as a regulatory crackdown on e-commerce giants overshadowed an afternoon rebound in chip stocks.

The Hang Seng Tech Index slid 1.46 percent on Thursday after Beijing's market watchdog warned Alibaba Group and JD.com over deceptive marketing practices, dragging down the broader Hong Kong market.

The State Administration for Market Regulation warned e-commerce platforms against deceptive promotional tactics, according to a person familiar with the matter. The move adds to regulatory headwinds for China's internet sector after a period of relative policy calm that had supported a rally in Hong Kong-listed tech names.

Alibaba Group (9988.HK) tumbled 5 percent, paring losses from an intraday decline of as much as 5.9 percent. JD.com (9618.HK) also declined. Tencent Holdings (0700.HK) fell 2 percent and Baidu Inc. (9888.HK) dropped 3 percent. The broader Hang Seng Index lost 0.65 percent, extending declines to a second session. The losses in heavyweight tech names were the primary drag on the benchmark, with the e-commerce and internet sectors accounting for the bulk of the index's decline.

In afternoon trading, chip stocks reversed earlier losses, with Montage Technology (澜起科技) surging 6 percent, GigaDevice (兆易创新) adding 5 percent, and Hua Hong Semiconductor (华虹宏力) along with Semiconductor Manufacturing International Corp (中芯国际, 0981.HK) each rising more than 1 percent. The semiconductor rebound helped the HSTECH trim what was at one point a 2.5 percent intraday decline, suggesting rotational buying into the chip sector.

Chip Stocks Lead Afternoon Rebound

The afternoon recovery in semiconductor names helped pare losses in the broader market. Montage Technology's 6 percent gain led the chip sector higher, followed by GigaDevice's 5 percent advance. The rebound came despite the broader tech selloff, suggesting investors see value in semiconductor names as the AI buildout continues. The chip sector's resilience stands in contrast to the weakness in e-commerce and internet stocks, highlighting divergent investor sentiment within the broader technology space.

The divergence extended to AI model developers, with Zhipu AI (智谱) gaining 1 percent while MINIMAX slid 4 percent, as investors sorted winners from losers in China's crowded AI sector. The contrasting moves highlight the market's selective approach to AI exposure, favoring companies with clearer monetization strategies.

The regulatory pressure on e-commerce comes as Beijing balances its push for tech sector growth with consumer protection measures, creating uncertainty for the sector's near-term outlook. The Hang Seng Tech Index has now fallen in two consecutive sessions, erasing some of the gains from last month's rally.

This article is for informational purposes only and does not constitute investment advice.