Chinese tech stocks plummeted under pressure from Alibaba and YMTC's IPOs
Investors are concerned about the influx of shares
On Monday, Chinese tech indices fell into negative territory. Photo: Robert Way/Shutterstock
Chinese technology stocks fell by several percent during trading on Monday, August 24. The market reacted negatively to the prospect of capital dilution due to large-scale offerings by Alibaba and Yangtze Memory, according to Bloomberg .
Details
The Hang Seng Tech Index, which tracks the average performance of the largest technology companies listed on the Hong Kong Stock Exchange, fell as much as 4% at its low on Monday and ended the day down 3.6%. This came after e-commerce giant Alibaba announced that it had raised 80 billion Hong Kong dollars ($10.2 billion) through the largest secondary offering of shares in Hong Kong.
On the mainland market, the STAR 50 index—which is dominated by chipmakers—fell 3.8% to its lowest level in about three weeks, Bloomberg reported. The Shanghai Stock Exchange accepted an IPO application from chipmaker Yangtze Memory (YMTC). This could be one of the country’s largest semiconductor IPOs in recent years, according to The Wall Street Journal.
Alibaba's stock plummeted 8.9%. Shares of its competitor, Tencent Holdings, fell 3.6%, while Baidu's shares dropped 3.9%.
What People Are Saying in the Market
The sell-off came amid a broad decline in Asian tech stocks due to renewed doubts about the sustainability of the artificial intelligence trend ahead of the release of key financial reports from major companies, including Nvidia, later this week, according to Bloomberg. The prospect of a share sale by Alibaba and Yangtze Memory further dampened sentiment in China, given Alibaba’s expected capital dilution and concerns that other tech companies might follow suit.
“All companies that invest in AI raise funds by issuing new shares—essentially passing on the cost of AI investments to the general public and investors,” noted Xiang Xiaotian, director of Shanghai Chengzhou Investment Management. “There is still no clear return on these costs, so regardless of whether AI is financed through equity or debt, investors will feel some anxiety.”
"Alibaba's move came as a complete surprise," said Wei-Sern Ling, managing director of Union Bancaire Privée. "A fundraising effort like this will undoubtedly have a negative impact on sentiment across the entire Chinese internet sector."
This article was AI-translated and verified by a human editor
