On Feb. 21, Chinese gaming giant Tencent Holdings shares fell 5.2%, the most since September last year. Its stock price has fallen 40% from the peak in January last year.

Other tech companies in China also saw their shares drop, with the sector, in general, seeing the worst two-day decline since July on Feb. 21.

Ant’s parent company, Alibaba Group, saw its stock drop 3.9%. The Hang Seng Technology Index, which monitors the largest Chinese technology companies, fell 5.9% during two sessions, the most remarkable drop since July 2011. According to Bloomberg, the slide began on Feb. 18, when Meituan’s stock fell as much as 18% after Beijing implemented a new guideline to limit the delivery giant’s service fees.

Justin Tang, Head of Asian research at United First Partners, confirmed that “there is concern about new regulatory reform.”

He added, “There was a sense of ‘this is it in relation to reforms.’ Investors are now thinking that there could be more to come.”

Tencent, Alibaba, and Meituan all had a low year in 2021 as Beijing sought to strengthen its grasp on user data and pushed down on monopolistic activity. The year-long crackdown has harmed over 1.5 trillion dollars in market value for the nation’s tech sector.

According to Bloomberg, the significant shares tumble also came after an online rumor surrounded Tencent over the weekend that the company was again caught up in regulators’ crosshairs. Zhang Jun, the company spokesman, turned down the claims but gave no further details.

The same trepidation echoed the entire sector as Chinese regulators on Feb. 18 warned against speculative fund-raising and investment products based on metaverse.

Metaverse is a virtual-reality-based social media concept that has seen Chinese tech giants actively looking into building apps for it. According to investment bank Morgan Stanley, the market is estimated to be worth 8 trillion dollars in the future.

Castor Pang, Head of research at Core Pacific-Yamaichi, said that “The market is very fearful that more crackdown will come and that could leave technology companies very little room to turn around their businesses. The metaverse fears shows that the market is worried that tech firms may not be able to grow a new business rapidly, like how they did in the past in China. That’s really dampening the already-fragile sentiment.”

In January, Du Zhengping, Head of the China Mobile Communications Association’s metaverse industry committee, told Reuters that, “Traditional Chinese internet businesses developed first and were then regulated. Industries like the metaverse will be regulated as they are built.”

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