Baidu Inc (HK:9888), Alibaba Group Holding Ltd (HK:9988), and Tencent Holdings Ltd (HK:0700) all saw their Hong Kong-listed shares plummet on Monday, amid rising expectations of a sharp increase in US interest rates.
The three stocks, known as China’s “BAT” trifecta, fell between 2 and 4 percent during morning trading. They caused a 1.7% decline in the Hang Seng TECH index and weighed on Hong Kong’s benchmark index. The three also give a good idea of how people in Asia feel about technology stocks.
This week, technology stocks are getting hit even harder because Friday’s U.S. payrolls report was much better than expected. This has made people think that the Federal Reserve will raise interest rates a lot at its September meeting.
Following the release of the report, the dollar appreciated by 0.9%, while 10-year Treasury rates surged to a one-month high. The NASDAQ Composite fell 0.5% on Friday, and Nasdaq 100 Futures suggest a quiet open for today.
Rising interest rates devalue the future earnings of technology businesses, reducing the attractiveness of their stock prices. In 2022, the Fed has raised interest rates four times. The most recent increase was in July.
This week, ahead of Wednesday’s release of the monthly U.S. CPI inflation data, the likelihood of a rate hike will increase. Even though the number is likely to have gone down a little bit in July compared to the month before, any sign that inflation is still high will continue to hurt technology shares.
This has negatively impacted the valuations of Alibaba Group Holdings Ltd ADR (NYSE:BABA) and Baidu Inc’s (NASDAQ:BIDU) U.S. listings, with the former reaching an all-time low in this year.
Along with problems with the economy as a whole, the three companies that make up BAT have to deal with more government scrutiny in China, which is their biggest market.
The valuation of the three businesses, which were once the most valuable in Asia, has been seriously harmed by the crackdowns against big tech in the mainland, beginning in 2021.
