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Chinese Tech Stocks Drop Over 3%, Approaching Correction

Alice by Alice
2025-03-25
in News
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Stocks2

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Chinese technology stocks experienced their largest drop in a month on Tuesday, with the Hang Seng Tech Index falling by as much as 3.8%. This drop marked a more than 9% decline from its peak on March 18, as sentiment was dampened by Xiaomi Corp’s $5.5 billion share sale.

Xiaomi’s stock tumbled by 6.6% at one point, exacerbating the market’s downward pressure following the upsized share placement. The decline comes at a time when investors are searching for fresh momentum to continue the strong rally seen earlier this year.

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Market Struggles Amidst Stagnating Sentiment

Trading in Chinese stocks has been volatile in recent sessions. Despite strong earnings from the country’s tech companies during the most recent earnings season, the momentum is proving difficult to sustain. The Hang Seng Tech Index’s valuation is approaching a three-year average, adding to concerns about further price declines.

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Steven Leung, an executive director at UOB Kay Hian Hong Kong Ltd., noted that while earnings have generally exceeded expectations, they did not provide any “positive surprise.” The upsized share placement by Xiaomi has further weighed on market sentiment, with some investors concerned about its potential impact on market liquidity.

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Hang Seng Tech Index’s Year-to-Date Performance

Even with Tuesday’s decline, the Hang Seng Tech Index is still up by 24% for the year. The rally in Chinese tech stocks began earlier this year, spurred by President Xi Jinping’s support for major business leaders and the rise of DeepSeek. However, any further slide in the sector may raise concerns among investors, particularly those hoping to see Chinese markets emerge as a viable alternative to U.S. markets.

Specific Stock Movements

Alibaba Group: Shares of Alibaba slid more than 3% after its chairman warned of a potential bubble in data center construction.

Sunny Optical Technology Group: The company’s shares plunged nearly 9% after it warned of a possible capacity glut in the sector.

Charu Chanana, Chief Investment Strategist at Saxo Markets, stated that Alibaba’s caution regarding a potential bubble in AI data center buildouts has added pressure on the market. This caution suggests that the rapidly growing AI theme may face some short-term challenges.

As Chinese tech stocks face pressure, investors are closely monitoring whether this decline will dampen the optimism surrounding the sector or if the rally can continue.

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  • Where to Buy General Electric Stocks?
  • Where to Buy Stocks Under $50?
  • When to Buy and Sell Stocks
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