Why Chinese Tech Stocks Alibaba, Tencent, and Futu Holdings Plunged Today

Source The Motley Fool

Shares of major Chinese tech and consumer stocks such as tech conglomerates Alibaba (NYSE: BABA) and Tencent (OTC: TCEHY), as well as digital online broker Futu Holdings (NASDAQ: FUTU) were all falling today. They were down 4.3%, 5.6%, and 5.2%, respectively, as of 1:49 PM ET.

The across-the-board move indicates that the declines had to do with Chinese stocks broadly and not individual stock news. Most likely, the downdraft was caused by disappointment over today's action -- or rather inaction -- by China's central bank. In addition, a Wall Street analyst issued a cautious note on Chinese stocks last night after a huge year-to-date rally, which may have encouraged some profit-taking.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

China's central bank holds rates, and investors take profits

The big rally in Chinese stocks since last summer, and especially since the beginning of 2025, has largely been due to new stimulus measures. Some are already announced, and some are anticipated in the future.

China has been mired in a recessionary state ever since the government's heavy-handed crackdown on tech companies and entrepreneurs, the restrictive "zero-Covid" policies, and the popping of the country's property bubble. With the prospect of higher U.S. tariffs on Chinese goods ramping up, people have been reluctant to spend.

Thus, the government and the People's Bank of China (PCOB) have embraced more stimulus measures since last summer. As part of that, the PCOB has been lowering interest rates, with its latest 25-basis-point cut coming last October.

However, China is also trying to balance stimulus measures with not letting its currency devalue too much. Lower interest rates generally cause a debasement of a country's currency, if a country cuts rates while peers do not. So today, the PBOC opted to leave the one-year loan prime rate at 3.1% and the five-year rate at 3.6%, instead of doing another cut.

That may have disappointed some Chinese investors, who might have decided to take profits on the news. After all, Chinese stocks have run up hard this year into today. A combination of expected stimulus, the DeepSeek AI model breakthrough in January, and lower valuations than U.S. counterparts has caused a big surge in Chinese stocks to date. Even with today's sell-off, Alibaba, Tencent, and Futu Holdings are up 69%, 31%, and 43%, respectively, on the year.

Yesterday, analysts at Bank of America cautioned that a correction could be coming for Chinese stocks. The analysts noted that the recent rally bears similarities to the early 2015 rally in Chinese stocks, as the country attempted to stimulate its way to more consumer-oriented spending and away from manufacturing and industrial exports. Similarly, like the DeepSeek and AI enthusiasm of today, investors were also excited about Chinese technology breakthroughs in 2015, with Alibaba's landmark initial public offering coming at the end of 2014.

The combination sent Chinese stocks soaring in mid-2015, but that rally eventually collapsed back down and even below prior levels, as the global economy slowed. The analysts elaborated: "Performance of the HSCEI/MSCI China in the past 17mths trended closely to the trajectory a decade ago, making us worry that we might be approaching some correction soon."

A tough call for China investors and central bankers

On the positive side, China's central bank might have felt comfortable holding rates today because China's economy seems to be picking up a bit. Recent retail sales and industrial output readings in the country showed an improvement in growth, and yesterday, Tencent reported earnings that showed accelerating revenue and earnings growth relative to the prior year.

That being said, the resumption of growth could stall if China's central bank remains too restrictive, or if the government's proposed stimulus measures fall short of what is necessary. Given all the uncertainty around the final policy, as well as the ever-changing tariff policy in the U.S., it's no wonder investors are booking profits today after a strong run.

Should you invest $1,000 in Alibaba Group right now?

Before you buy stock in Alibaba Group, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alibaba Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $720,291!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of March 18, 2025

Bank of America is an advertising partner of Motley Fool Money. Billy Duberstein and/or his clients have positions in Bank of America. The Motley Fool has positions in and recommends Bank of America and Tencent. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Gold Price Forecast: XAU/USD drifts lower below $2,800   after Trump imposes tariffsGold price (XAU/USD) edges lower to around $2,795 during the early Asian session on Monday.
Author  FXStreet
Feb 03, Mon
Gold price (XAU/USD) edges lower to around $2,795 during the early Asian session on Monday.
placeholder
U.S. March Nonfarm Payroll Preview: Even If Data Aligns with Expectations, Financial Markets May Not Escape the Fate of VolatilityOn 4 April 2025, the United States will release its March Nonfarm Payrolls (NFP) data. The market consensus currently anticipates job growth of 128,000, a decline from February’s 151,000 (Figure 1). W
Author  TradingKey
Apr 02, Wed
On 4 April 2025, the United States will release its March Nonfarm Payrolls (NFP) data. The market consensus currently anticipates job growth of 128,000, a decline from February’s 151,000 (Figure 1). W
placeholder
What Crypto Whales are Buying For May 2025Crypto whales are making bold moves heading into May 2025, and three tokens are standing out: Ethereum (ETH), Artificial Superintelligence Alliance (FET), and Onyxcoin (XCN).
Author  Beincrypto
Apr 21, Mon
Crypto whales are making bold moves heading into May 2025, and three tokens are standing out: Ethereum (ETH), Artificial Superintelligence Alliance (FET), and Onyxcoin (XCN).
placeholder
Gold Price Forecast: XAU/USD attracts some sellers below $3,250 on firmer US DollarThe Gold price (XAU/USD) extends the decline to around $3,245 during the early Asian session on Thursday. The precious metal edges lower to near a two-week low amid easing US-China trade tensions and stronger US Dollar (USD) demand. 
Author  FXStreet
Yesterday 02: 14
The Gold price (XAU/USD) extends the decline to around $3,245 during the early Asian session on Thursday. The precious metal edges lower to near a two-week low amid easing US-China trade tensions and stronger US Dollar (USD) demand. 
placeholder
Ripple Price Forecast: XRP builds bullish momentum as Ripple eyes Circle with $5B acquisition bidRipple’s (XRP) price is consolidating at $2.21 at the time of writing on Thursday, reflecting sideways trading in the wider cryptocurrency market. There is a growing need for XRP to hold above the immediate $2.20 confluence support to validate the potential breakout targeting $3.00.
Author  FXStreet
18 hours ago
Ripple’s (XRP) price is consolidating at $2.21 at the time of writing on Thursday, reflecting sideways trading in the wider cryptocurrency market. There is a growing need for XRP to hold above the immediate $2.20 confluence support to validate the potential breakout targeting $3.00.
goTop
quote