JD.com falls 8.7% in Hong Kong as Walmart pulls shares, hitting Chinese tech stocks

Hong Kong stocks fell on concerns that foreign investors were dumping Chinese technology stocks due to weak corporate earnings and economic prospects. The report showed more hedge funds were closing their bets on Chinese stocks as the strategy failed to deliver outsized gains.

The Hang Seng index fell 0.7% to 17,391.01 on Wednesday, erasing all of this week’s gains. The Tech index fell 1.8%, while the Shanghai Composite index fell 0.4%.

JD.com fell 8.7 percent to HK$102.40, wiping HK$28.7 billion ($3.7 billion) off the Hong Kong company’s market capitalization. U.S. retailer Walmart Inc. raised $3.6 billion from the sale of its stake in the Chinese company, Bloomberg reported. It sold 144.5 million shares at $24.95 each in New York, an 11 percent discount to the market price, ending a partnership that had lasted since 2016.

JD.com is a “valued partner,” Reuters reported, citing a Walmart statement. The upcoming sale will allow the U.S. retailer to focus on its own operations in China and allocate capital to other priorities, the report said.

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Other Chinese technology shares fell in tandem on the news. Short-video platform owner Kuaishou Technology fell 9.9% to HK$40, Alibaba Group Holding fell 0.6% to HK$79.95 and smartphone maker Xiaomi retreated 0.9% to HK$17.52.

“The news has weighed on overall sentiment for technology stocks,” said Dickie Wong, executive director at Kingston Securities. “Investors, including well-established fund managers, are turning conservative,” as many Hong Kong-listed technology companies also have large foreign shareholders, he added.

Investors have struggled to maintain interest or bets on Chinese stocks as the economy lost steam in the last quarter and stimulus failed to restore confidence. Hong Kong-based hedge fund Strategic Vision Investment (SVI) closed bets on Chinese stocks According to Reuters reporting on Tuesday, its long-short strategy did not yield results.

Ray Dalio, the billionaire founder of Bridgewater Associates, speak in a virtual presentation at the Greenwich Economic Forum in Hong Kong in June 2024. Photo: Jiaxing Li — Ray Dalio, billionaire founder of Bridgewater Associates, speaks during a virtual presentation at the Greenwich Economic Forum in Hong Kong in June 2024. Photo: Jiaxing Li

Instead, investors are looking for undervalued stocks and those supported by share buyback programs, Wong said. Share buybacks in Hong Kong this year have reached a record HK$164.8 billion, exceeding last year’s total by 30 percent, according to benchmark compiler Hang Seng Indexes Company.

Stock exchange operator Hong Kong Exchanges and Clearing fell 1.5 percent to HK$228.60 despite reporting a 9 percent rise in second-quarter profit. It was the exchange operator’s best performance in the second quarter, helped by higher fees from new share offerings and general trading.

A young man plays the ‘Black Myth: Wukong’ video game during its launch in Shanghai on August 20, 2024. Photo: AFP — A young man plays the video game “Black Myth: Wukong” during its launch in Shanghai, August 20, 2024. Photo: AFP

Cutting losses, Sunny Optical Technology rose 8.4 percent to HK$49.25 after its quarterly profit beat estimates. Tencent, the world’s largest video game company, rose 0.3 percent after its new game Black Myth: Wukong became the most played title according to the ranking of the digital games store Steam published on Tuesday.

An index tracking the gaming sector fell 1.5%, and developer Huayi Brothers, the developer’s top shareholder, fell 9.9% on the Shenzhen Stock Exchange. The game’s publisher, Shanghai-listed Zhejiang Publishing, rose by a daily limit of 10%.

Elsewhere, Japan’s Nikkei 225 index fell 0.3%, while South Korea’s Kospi rose 0.2% and Australia’s S&P/ASX 200 rose 0.2%.