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Alibaba Is Tumbling. Chinese Tech Stocks Have a New Headache.

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After a brutal 2021, Alibaba shares have been outperforming in 2022.

Greg Baker/AFP via Getty Images


Alibaba

stock and other Chinese tech shares were tumbling on Monday as amid fresh fines from market regulators over disclosure rules.

China’s State Administration for Market Regulation announced Sunday a wave of penalties for improperly reporting past deals, in breach of competition law.


Alibaba

(ticker: BABA) and


Tencent

(0700.H.K.) were among the companies fined as a result.

Shares in e-commerce powerhouse Alibaba tumbled 8.6% in the U.S. premarket, with internet giant


Tencent
’s
stock trading 3% lower in Hong Kong. The selloff was felt across the sector, dragging down other Chinese tech stocks including


JD.com

(JD) and


NetEase

(NTES), which fell 5.3% and 4.7% in early trading, respectively, while


Baidu

(BIDU) has slumped 5.8%. Hong Kong’s tech-heavy

Hang Seng Index ended 2.8% lower.

Renewed regulatory pressures in China pour cold water on what has otherwise been a tremendous outperformance among Chinese tech stocks in 2022 following a brutal 2021. 

Alibaba lost almost half of its value last year, leading losses in a sector that was hammered by regulatory pressures on both sides of the Pacific. At the heart of the rout was a crackdown by Beijing on the country’s booming tech sector and threats from Washington to delist some U.S.-listed Chinese tech stocks. The Hang Seng Tech Index tumbled 32% last year, while the

S&P 500
gained 27%.

But 2021 has brought a turning of the tide. While most, if not all, tech investors are having a painful year—with stocks in a bear market amid high inflation, rising interest rates, and recession fears—Chinese tech stocks have been much more resilient.

One of the best performers among its peers, Alibaba has eked out a gain of about 0.5% year-to-date. By comparison, U.S. tech giants like


Apple

(AAPL) and


Alphabet

(GOOGL) are down close to 20%.

Analysts have been bullish that China’s tech stock outperformance can continue—but a lot of that optimism is riding on the idea that regulatory pressures are a thing of the past. The latest news is a stark reminder that they are not yet firmly in the rearview.

Write to Jack Denton at jack.denton@dowjones.com

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