Tencent, Alibaba and many other Chinese tech companies lose value due to Chinese Communist Party takeover

The days when its big tech companies were soaring and booming seem to be behind us. Xi Jinping clipped the wings of many of these giants last summer and now we have two of them suffering the effects in a devastating way. The Chinese tech bubble, which seemed to put these companies on a par with their U.S. counterparts, seems to have burst.

Chinese internet firms are trading at record low valuations. They enjoyed premium valuations during the past years of rapid expansion, but the massive sell-off has caused the bubble to burst completely.

As of last March 15 Tencent had lost $530 billion since its best valuation in February 2021. Alibaba is in the same boat, having lost almost $522 billion. They are the big players in a trend that affects others such as Meituan (down $254.6 billion) and even Xiaomi (down $56.1 billion).

Market cap loses China tech companies 2022The Hang Seng Index, something like the Chinese NASDAQ, has plummeted in recent weeks to lose 65% since its peak a year ago. In recent days there has been a rebound in these valuations following the apparent intention of regulators to relax the persecution of ‘big tech’, but the outlook is not good for the big Chinese technology companies.

Tencent’s collapse

The once pretty girl of the Chinese technology sector is in the doldrums. China’s second largest company is expected to unveil its slowest growth rate since data has been available.

Regulators are now seeking to spin off its celebrated WeChat Pay as a separate financial company, something that could undermine interest in its massive social network, WeChat, and the company is bracing for a significant number of layoffs.

It didn’t look like Tencent would be so badly affected by the wrath of China’s rulers, but restrictions in the world of video games – with extreme measures to limit the time young people spend on this form of entertainment – have wreaked havoc on the tech company’s waterline. And the same with streaming and social networks.

Alibaba, stopped in its tracks

Alibaba and its founder, a Jack Ma who reminded us of Elon Musk -much more demure in social networks, of course-, have probably been at the center of the Chinese wrath. In November 2020, the IPO of its Ant Group, a financial branch that looked set to be a bombshell, was suspended. Well, it was, but not in the way Ma expected.

That was the beginning of a series of missteps that have made Alibaba’s situation compromised. Its shares dropped so much that the company tried to take advantage of it to buy them back to get the share price up: it hasn’t worked.

LEAVE A REPLY

Please enter your comment!
Please enter your name here