Naspers plunges again as investors’ China fears grow

Investor concerns over China’s apparent willingness to aid Russia in its war against Ukraine punished Chinese shares again on Tuesday, inflicting further collateral damage on South Africa’s Naspers and its European-listed spinoff, Prosus.

Naspers and Prosus are directly exposed to the Chinese market through Prosus’s 28.9% stake in Tencent Holdings, which tumbled once again on Tuesday to hit fresh multi-year lows.

Naspers had lost 38% of its value up for the year to date to Monday’s close.

Tencent sank 10.2% by the Tuesday close in Hong Kong trading, sending Naspers down a further 10% in Johannesburg at 11.24am, on top of a 13% route on Monday. Prosus was off by a similar percentage in Amsterdam, touching a fresh record low earlier in the session.

The JSE All Share Index was trading down 3% at 11.22am, while the Top40 was off by 3.1%. The rand weakened slightly, touching R15.16/US$ and R19.76/£ at 11.36am.

Meanwhile, US-listed Chinese stocks also sank again on Tuesday, following a brutal rout in Asia, amid concerns that China’s ties with Russia may bring sanctions to Beijing, while persistent regulatory pressures also weighed.

American depositary receipts of e-commerce giant Alibaba Group fell 6.5% in US pre-market trading, while rival JD.com declined 4.5% and Pinduoduo tumbled 6%. Search engine operator Baidu slumped 5.9%. Through Monday’s close, Alibaba had fallen over 35% this year to the lowest level since June 2016.

Slumping

Chinese equities have been slumping since last week amid concerns about regulatory developments leading to possible delistings from the US exchange and as rising Covid cases have caused fresh lockdowns in some major Chinese cities. Reports that Russia had asked China for military assistance in its war against Ukraine has added more pressure.

While China denied the report, traders worry that potential sanctions against Beijing could hit global growth at a time when recession risks are already growing.

The Nasdaq Golden Dragon China Index, which tracks American depository receipts of Chinese firms, fell 12% on Monday to close at the lowest level since July 2013. Although the gauge is now down about 75% from its peak, fund managers are still leery of buying into the weakness, while JPMorgan Chase & Co analysts on Monday labelled some Chinese Internet names “uninvestable”.

Focus for technology investors is also turning to the US Federal Reserve’s policy meeting on Wednesday, where the central bank is expected to begin a rate hike cycle, another negative for growth stocks valued on future profits.  – © 2022 NewsCentral Media, with additional reporting by Sagarika Jaisinghani, © 2022 Bloomberg LP