Chinese Tech Stocks Fall as U.S. 10-Year Treasury Yield Surpasses 5%

Chinese technology and semiconductor stocks faced significant selling pressure on Thursday as a surge in U.S. Treasury yields to their highest levels in nearly two decades rattled investor sentiment toward growth-oriented equities. The move higher in global bond yields raised concerns about corporate valuations, triggering a broad-based decline across major Asian indices.

Market Sell-Off

Hong Kong's Hang Seng index dipped 0.5%, extending losses from the previous session, while mainland China's blue-chip Shanghai Shenzhen CSI 300 index slipped nearly 1%. The declines were pronounced in the technology sector, which is particularly sensitive to interest rate expectations.

Key movers in Hong Kong included:

• Baidu Inc. (9888.HK): -2%
• Tencent Holdings (0700.HK): -1%
• Semiconductor Manufacturing International Corp (SMIC) (0981.HK): -2%
• Hua Hong Semiconductor (1347.HK): -3.6%

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The pressure also extended to U.S.-listed Chinese shares in overnight trading, where Alibaba Group fell 4.7% and Baidu's American depositary receipts (ADRs) lost 2.9%.

Yield Surge Pressures Valuations

The sell-off was directly linked to a sharp move in the U.S. bond market. The benchmark U.S. 10-year Treasury yield climbed above 5% to its highest level since 2007, trading around 5.12%. Other key rates also rose, with the 2-year yield approaching 4.9% and the 30-year yield exceeding 5.4%.

Higher government bond yields, which are considered a risk-free rate, increase the discount rate investors use to calculate the present value of future corporate earnings. This valuation pressure is particularly acute for technology and other growth stocks, as their market prices are heavily dependent on the prospect of long-term profits. As the discount rate rises, the present value of those future earnings falls, making the stocks less attractive to investors.