Chinese Stocks Extend Rout in U.S. on Tencent Sale Concerns

(Bloomberg) -- Chinese companies listed in the U.S. extended their decline on Wednesday after Tencent Holdings Ltd. cut its stake in an online gaming and e-commerce company, triggering concerns of similar action at other firms amid Beijing's regulatory crackdown on the sector.

Shares of Tencent slipped 4.5%, while Bilibili Inc. dropped 6.1% and JD.com Inc. slumped 1.8%. Pinduoduo Inc. and Baidu Inc. also fell at least 1.8% each as technology stocks globally felt the pressure of renewed concerns about the pandemic's impact on global growth and the prospects of the Federal Reserve raising rates this year.

Read: Heaviest Tech Selling in a Decade Fueled Stock-Market Rate Rout

Tencent reduced its stake in Singapore-based Sea Ltd. by selling $3 billion worth of shares to cut its holding in the firm to 18.7%. The move comes less than a month after the company said it would hand out more than $16 billion of JD.com stock as a one-time dividend and adds to expectations that the company and its rivals may pare holdings as China pushes to control anti-competitive behavior.

In addition to its now reduced holdings in Sea and JD.com, Tencent also has major stakes in number of other U.S.-listed Chinese stocks. The tech giant holds at least 10% of outstanding shares in names including Bilibili, Pinduoduo and Futu Holdings Ltd., according to Barclays analyst Jiong Shao.

“We are not sure whether recent announcements around Sea and JD.com are the beginning of a series of such transactions for other stakes, or they are situation-specific,” Shao wrote in a note.

The share sale sent Hong Kong's Hang Seng Tech Index spiraling lower on Wednesday for its third straight day of declines. Meanwhile, the Nasdaq Golden Dragon China Index -- which tracks Chinese firms listed in the U.S. that conduct a majority of their business in China -- slumped 2.7%, its fourth straight day of declines.

Read: China Tech Selloff Deepens as Tencent Sale Spooks Traders

Chinese technology stocks have been under pressure for the better part of a year as Beijing's crackdown on the sector has spooked investors. The Nasdaq Golden Dragon China Index fell 43% last year, in its worst performance since 2008.