Chinese tech stocks tumbled Friday, while the country’s central bank bolstered its defense of the yuan, as fears over the health of the world’s second-largest economy continued to mount.
China’s economic woes increased the pressure on some of the country’s largest internet companies, as the Hang Seng Tech index slumped more than 3%.
Alibaba
(BABA) fell 3.4%,
JD.com
(JD) slumped 5.3%—extending its losing streak to six days— while
Baidu
(BIDU) fell 2.7%. The trio’s American depositary receipts were all lower in premarket trading Friday.
Hong Kong’s Hang Seng index fell 2.1% Friday, entering bear market territory.
“The downbeat tone has continued in Asia overnight, with all the major indices losing ground. The Hang Seng has seen some of the biggest declines, and as it stands right now, the index is more than 20% beneath its recent peak in January,”
Deutsche Bank
strategist Henry Allen said in a note Friday.
In a bid to defend the Chinese yuan, the People’s Bank of China fixed the currency at 7.2006 per U.S. dollar. That’s significantly below the average estimate of 7.305 per dollar, ING economists said.
ING FX strategist Francesco Pesole said it was “the biggest defense of the yuan via fixing guidance on record.”
Economists have become increasingly less confident of China’s ability to reach its annual target of 5% gross domestic product growth in recent days.
Nomura
economists were the latest to cut their forecasts Friday, now predicting 4.6% growth, down from 5.1%.
Morgan Stanley,
J.P. Morgan
and
Barclays
have all lowered their forecasts, to below 5% this week.
Nomura economists, led by Ting Lu, cited China’s “ongoing downward spiral,” pointing to weaker-than-expected data in July. He noted that growth in industrial production, retail sales, fixed investment, and exports all fell last month.
Write to Callum Keown at callum.keown@barrons.com
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