Shares in Chinese tech giants plunged on Thursday morning after Tencent reported lacklustre profits, fuelling wider concerns for a grim earnings season as China’s economic outlook worsens.

Tencent’s Hong Kong-listed shares plunged more than eight per cent in early trading, a day after it posted its slowest revenue gain since going public in 2004.

Tech behemoth Alibaba dropped more than six per cent, while Baidu and Xiaomi each fell four per cent.

The sell-off came despite Chinese leaders recently hinting that an 18-month regulatory crackdown on the tech sector may ease.

Premier Li Keqiang on Wednesday expressed support for digital-economy companies and their public listings, according to state broadcaster CCTV.

Earlier, vice premier Liu He also promised to back “the sustainable and healthy development of the platform economy and the private economy,” CCTV reported.

But in a conference call with reporters after announcing the results, Tencent president Martin Lau warned that Beijing’s latest show of support for the tech sector would take time to bear fruit. “We can clearly see that from the most senior level, there’s a pretty clear signal of support released. But for this to translate into real impact on our business, there is going to be a time lag,” Lau said, according to Bloomberg. “It would take the specific regulators and ministries to translate this direction into real action.”

Tech giants in China have seen their earnings shrink as a result of both regulatory scrutiny and the country’s economically debilitating coronavirus lockdowns.

Tech giants in China have seen their earnings shrink as a result of both regulatory scrutiny and the country’s economically debilitating coronavirus lockdowns

China is the last major global economy to stick to a rigid zero-COVID policy, which has led to millions being locked down in economic hubs such as Shanghai as the virus spread. Shanghai’s lockdown has wiped out commercial payments and may undercut advertising spending in the current quarter, top Tencent executives said, according to Bloomberg.

Tencent’s revenue came in at 135.5 billion yuan (€19.1 billion) for the three months ended March, putting year-on-year growth at nearly zero and setting a record low for the company’s quarterly revenue gain.

Xiaomi is expected to report first-quarter results later on Thursday, while Alibaba and Baidu will do so next week.

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