Alibaba stock and many other Chinese tech names dropped on Friday as Hong Kong's benchmark index was slammed amid elevated U.S. Treasury yields.
Any investors still wondering how the increase in bond yields may be impacting markets and stocks outside the U.S. just got the answer. Hong Kong's Hang Seng Index fell 2.6% in Friday trading, seeing its worst one-day performance in more than six months.
Alibaba's American depositary receipts were down 1.5% in premarket trading on Friday, bucking a broad rise in futures tracking the S&P 500, Nasdaq, and other U.S. stocks.
Likewise, JD.com and Baidu-two other widely traded Chinese tech ADRs-were both down near 1% in the premarket.
Chinese traders have sold off tech stocks amid a surge in U.S. Treasury yields over the last month. The yield on the benchmark 10-year Treasury rose at its fastest pace in a century in the third quarter, with yields jumping from around 4.6% to above 5.3%, the highest level in 24 years, from late August through September.
Higher Treasury yields aren't just a problem for the American stock market. The 10-year note is a global benchmark for borrowing costs, and when yields surge, bonds both become more attractive and reduce the present value of future predicted earnings underpinning stock valuations. For tech stocks, which typically trade at extended valuations due to expectations of high growth in the future, higher yields pinch harder.
Hong Kong-and Alibaba-are catching up with the pain, and really feeling it. While the S&P 500 is flat over the last month, the Hang Seng is down 5.3%, with Friday's rout counting for much of the action.