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Chinese tech stocks Didi and Pinduoduo tumble on Wall Street

Scrutiny from Beijing and disappointing sales lead to declines

Didi's stock has dropped more than 40% since its initial public offering at the end of June.   © Reuters

NEW YORK -- Shares in Chinese stocks tumbled in U.S. trading on Friday following reports that Beijing ordered ride-hailing group Didi Global to delist from the New York Stock Exchange and Nasdaq-listed e-commerce platform Pinduoduo missed quarterly revenue expectations.

The declines outpaced the broader market, where fears of a new COVID-19 variant pushed the S&P 500 to its worst day since February.

Didi shares closed down 2.9% at $7.88 having been down more than twice that amount. Bloomberg and Reuters both reported that the Cyberspace Administration of China told executives to devise a plan to delist from New York, citing concerns about sensitive data being leaked.

Options include going private or pursuing an alternative listing in Hong Kong that would then be followed by delisting from NYSE, Bloomberg reported.

Shares of SoftBank, which owns 21.5% of Didi through its venture capital fund, fell more than 5% following the news as trading closed for the week in Tokyo.

Didi's stock has dropped more than 40% since its initial public offering at the end of June, which was the biggest of any Chinese company since Alibaba's in 2014. Soon after, the Cyberspace Administration of China announced an investigation of the company. It ordered app stores to remove Didi apps and told the company to stop registering new users.

Beijing is increasingly concerned about the wealth of user data companies like Didi are amassing and more broadly stepping up scrutiny of the tech sector's practices, including concerns about monopolistic practices. Chinese President Xi Jinping is promoting a "common prosperity" plan to reduce wealth inequality, driven in part by the riches being made by tech executives at companies like Didi, Pinduoduo and Meituan.

Delivery services giant Meituan on Friday posted its biggest loss in three years due in part to a $530 million fine from Chinese antitrust regulators for violating antimonopoly laws. It also forecast a weaker outlook for its food delivery business, and its shares closed down almost 3.9% in Hong Kong, to finish the week down nearly 10%.

That compounded concerns about the growth outlook for Chinese internet companies. Shanghai-based Pinduoduo's disappointing third-quarter revenue growth can be blamed in part due to continuing coronavirus outbreaks that curbed consumer spending.

Its U.S.-listed shares closed down 15.9% at $68.46. The stock has fallen nearly 60% this year amid intensifying scrutiny of e-commerce from Chinese competition regulators and growth concerns. This month Tencent posted its slowest quarterly sales growth since going public in 2004, and Alibaba cut its sales growth projections citing "softer market conditions."

The S&P 500 closed down 2.3% in a holiday-shortened trading session on Friday. The Hang Seng Index, which tracks the largest companies listed on the Hong Kong Stock Exchange, was down 2.7% for its worst drop in two months.

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