Hong Kong’s benchmark index suffered its biggest one-day sell-off since the global financial crisis and tech stocks were routed as investors digested the impact of China’s 20th Party Congress and the confirmation of President Xi Jinping to an unprecedented third term.
The Hang Seng Index fell 6.4% to 15,180.69 at the close of trading on Monday, the lowest level since April 2019 and the biggest one-day dip since November 2008.
Meanwhile, tech companies Alibaba Group Holding and Tencent Holding closed down more than 11% in Hong Kong, while search company Baidu and food delivery company Meituan were down 12% and 14% respectively.
The market gyrations were widely attributed to Xi tightening his grip on power and the implications that this could have for private sector firms.
In addition to securing a third term as leader, Xi, who has proven to be no ally of the tech giants, stuffed the Politburo standing committee, the ruling inner circle in China’s Communist Party, with loyalists.
As part of the reshuffle, Li Qiang, party secretary of Shanghai who oversaw the lockdowns in the metropolis earlier this year, is expected to be name premier, replacing Li Keqiang, who is widely seen as more pro-business.
The sell-off comes despite an apparent softening by Beijing towards China’s tech giants in recent months following a regulatory crackdown that has already wiped billions of dollars off the market capitalisations of the country’s most valuable companies.
In July, Didi was fined $1.2bn following a probe into antitrust violations, effectively drawing a line under one of the most high-profile casualties of the crackdown.
This followed on the heels of China’s gaming regulator granting publishing licences for 45 games from developers including Baidu, ending a nine-month freeze.
Beijing has also sought to mitigate the effects of a downturn in the country’s property sector, which has roiled financial markets, cutting mortgage loan interest rates in May for some buyers, in an effort to buttress the sector.