Shares of prominent Chinese technology and consumer companies, including Alibaba, Tencent, and Futu Holdings, experienced declines today. As of 1:49 PM ET, Alibaba, Tencent, and Futu Holdings saw their shares decrease by 4.3%, 5.6%, and 5.2%, respectively. This widespread decline suggests that the dip was linked to broader Chinese market movements rather than specific news related to these companies. Contributing to the decline was likely the disappointment over the lack of action from China’s central bank today. Additionally, a recent note from a Wall Street analyst, issued after a significant rally earlier this year, may have triggered some profit-taking.
China’s stocks have seen a substantial rally since last summer and the start of 2025, primarily driven by new and anticipated stimulus measures. The country’s recessionary state has persisted following government crackdowns on technology companies, stringent “zero-Covid” policies, and the collapse of the property market. Concerns over potential U.S. tariffs on Chinese goods have also dampened consumer spending.
In response, the Chinese government, alongside the People’s Bank of China (PBOC), has introduced several stimulus measures since last summer, including a 25-basis-point interest rate cut last October. However, the PBOC is balancing these efforts with the need to prevent excessive currency devaluation. As such, the bank decided to maintain the one-year loan prime rate at 3.1% and the five-year rate at 3.6% today, potentially disappointing some investors and triggering profit-taking. Despite today’s sell-off, Alibaba, Tencent, and Futu Holdings have seen gains of 69%, 31%, and 43%, respectively, for the year.
Last night, analysts from Bank of America warned of a possible correction in Chinese stocks, noting similarities to the early 2015 rally driven by attempts to shift towards consumer spending. The enthusiasm for technology breakthroughs, such as the DeepSeek AI model in January, alongside the lower valuations compared to U.S. counterparts, has fueled the recent surge in Chinese stock prices. A previous rally in mid-2015 eventually collapsed as the global economy slowed, raising concerns the current rally might follow a similar trajectory.
China’s central bank may have opted to hold rates due to signs of economic recovery in the country. Recent improvements in retail sales and industrial output, along with Tencent’s positive earnings report showing revenue and earnings growth, reflect this. However, economic recovery might falter if the central bank remains restrictive or if the government’s stimulus measures fall short. Given these uncertainties, as well as evolving U.S. tariff policies, investors are capitalizing on profits following this year’s robust performance.
Bank of America is an advertising partner of Motley Fool Money. Billy Duberstein and/or his clients hold positions in Bank of America. The Motley Fool holds positions in and recommends both Bank of America and Tencent, and also recommends Alibaba Group. The Motley Fool’s disclosure policy is available for review.
