China Tech Stocks Deepen Losses, PBOC Holds LPR In February

Li Chen
20 Feb, 2025
Hong Kong

Stock market indexes in China and Hong Kong dropped for the second consecutive session amid worries about stretched valuations and ongoing trade tensions with the U.S. 

The Hang Seng index declined 1.5% and the mainland-focused CSI 300 index dropped 0.3%, as investors pulled back after a rally in tech stocks over the last  five week.

The Hang Seng Tech Index jumped to a five-month high and rebounded from the low in late January after the success of the affordable artificial intelligence chatbot Deep Seek raised hopes that more companies would be able to implement advanced technology. 

The success of the Deep Seek reversed the outflow of foreign funds, as investors speculated about the possible rise in earnings growth for leading tech companies. 

However, the market rally came to a halt this week as investors began questioning stretched valuations of tech companies amid a lack of solid evidence of earnings growth.

The People's Bank of China held its loan prime rates for the fourth month in a row in February.

The one-year loan prime rate was held at 3.1%, while the five-year rate was unrevised at 3.6%, the reference rate for mortgage lending. 

Both reference rates for consumer and housing loans are now at record lows, since these rates were dropped in October and July last year.

Moreover, market sentiment was defensive after the members of the U.S. rate-setting committee demanded the emergence of solid evidence of a decline in inflation amid policy uncertainties and cited the inflation outlook. 

The U.S. Federal Reserve paused its rate-cutting campaign in January after cutting rates three times in a row since September. 

 

China Indexes and Stocks

The Hang Seng index decreased 1.5% to 22,591.58, and the mainland-focused CSI 300 index fell 0.3% to 3,928.90. 

Bilibili Inc. decreased 5.2% to HK $154.90, and the technology company is scheduled to release earnings later today. 

Alibaba Group Holding fell 2.6% to HK $120.90, and the e-commerce company is expected to deliver a strong increase in revenue and earnings, driven in part by the surge in cloud services. 

Meituan decreased 6.6% to HK $156.60, Tencent Holdings dropped 2.5% to HK $485.20, and Baidu Inc fell 3.3% to HK $85.50.