The Hang Seng Tech Index fell as much as 3.1% on Tuesday, on course for its lowest close since inception in July 2020. Alibaba Group Holding Ltd. led declines following a Bloomberg report that authorities are kicking off another round of checks on its fintech business arm. 

The rout weighed on the broader Hong Kong market, with the Hang Seng Index slipping as much as 3.5%, the most since September. The weakness also comes as global equities face pressure from escalating tensions in Ukraine.

Tencent Holdings Ltd. dropped as much as 3%, extending recent declines even after the company denied it’s facing a new crackdown on its core businesses. Meituan dropped to the lowest since July 2020 after Beijing on Friday ordered the delivery platform to cut fees. 

Investor concern is mounting that a new wave of crackdowns could be in the pipeline for the sector. The broader Hang Seng Index has more than halved from last year’s February peak following Beijing’s year-long anti-monopoly campaign.

The question is “how much large internet companies’ earnings will be impacted in the long-term if they are required to take increasing social responsibility,” said Jian Shi Cortesi, a portfolio manager at GAM Investment Management. There are not enough details currently to make a conclusion yet, she added.

E-commerce giant Alibaba is due to report an estimated 60% quarterly profit drop on Thursday. The crackdown by Beijing that began in late 2020 has hit almost every corner of the technology industry in China, ranging from data security, digital business to online games and overseas listings. 

Members of the Hang Seng Tech Index have lost a combined $1.6 trillion since the February peak last year, Bloomberg data show. 

Global funds and analysts, including at Goldman Sachs Group Inc. and UBS Group AG, had turned more optimistic on the sector in late 2021, citing easing policy concerns and cheap valuations. But stocks have extended losses in 2022 and the slew of new measures recently are making global funds more cautious. 

The recent announcements “might make investors a bit more reluctant to invest in Chinese internet names,” said Herald van der Linde, head of Asia Pacific equity strategy at HSBC Holdings Plc.