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Tech Leads Slump in Chinese Stocks on Earnings, Trump Risks

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(Bloomberg) — Chinese technology stocks listed in Hong Kong continued their decline from October highs to about 20%, as investors cut positions amid rising geopolitical risks and caution toward earnings.

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The Hang Seng Tech Index fell 3.2% on Thursday, with JD.com Inc and Xiaomi Corp among the biggest contributors to the gauge’s decline. The sector’s weakness affected a broader index of Chinese stocks listed in Hong Kong, which fell by 2.2%.

Chinese stocks faced renewed selling pressure as US President-elect Donald Trump’s government begins to take shape, with Beijing’s critics taking key positions. This has exacerbated fears of escalating Sino-US tensions under the new administration. There was also pre-earnings caution from tech heavyweights JD.com later Thursday and Alibaba Group Holding Ltd. on Friday, which will highlight the strength of consumption in China.

“Investors are reducing their risk exposure ahead of earnings, and there are also concerns about Trump and profit-taking from the stimulus-driven rally,” said Fei-Cern Ling, managing director at Union Bancaire Privee.

Shares of Tencent Holdings Ltd. closed. Down 0.1% in Hong Kong, erasing a 2.8% gain, even after posting a better-than-expected 47% increase in September quarter profits. Tencent has kicked off a closely watched earnings season for big tech companies, just as the Beijing government unleashes a basket of policy stimulus from interest rate cuts to debt swaps to revive the economy.

Chinese technology stocks need to boost earnings amid Trump and macro threats

The decline in Chinese technology stocks shows how quickly sentiment can turn if investor expectations are not met. The Hang Seng Tech Index rose more than 55% in about a month to October 7 as part of a broad rally fueled by China’s monetary stimulus campaign, before losing momentum as follow-up measures failed to have an impact.

In the local market, the CSI 300 index closed 1.7% lower in its biggest single-day loss since October 15.

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