By Sam Nussey

TOKYO (Reuters) -SoftBank Group Corp’s decision to sell down its Alibaba Group Holding stake for a $34 billion gain may be aimed at bolstering its finances, but it also underlines how CEO Masayoshi Son has cooled on China tech.

Son was formerly one of the sector’s biggest cheerleaders and Alibaba is his most famous bet, immensely profitable and for his fans, symbolic of his foresight and investing acumen.

Amid a sharp market downturn, however, Son will reduce his conglomerate’s stake in Alibaba to 14.6% from 23.7% by settling prepaid forward contracts, although the Chinese firm remains SoftBank’s largest asset.

“It seems like they’re saying ‘we think the outlook for China tech is pretty poor so we’re going to get in front of that’,” said Redex Research analyst Kirk Boodry.

A rough ride for Chinese tech companies after a regulatory crackdown that started in late 2020 has been exacerbated by tensions between Washington and Beijing.

Alibaba has been added to the U.S. Securities and Exchange Commission’s delisting watchlist as a result of a dispute over auditing compliance issues for U.S.-listed Chinese firms.

Murky prospects for the Chinese economy as Beijing pursues a zero-COVID policy that has led to stringent lockdowns have also not helped. Since the regulatory crackdown, Alibaba’s shares have fallen by more than two thirds to value the company at $250 billion.

“We have to watch (Chinese) government policy with caution and not be reckless,” Son told shareholders in June.

Son’s pullback contrasts with earlier optimism towards China tech that saw him pour $12 billion into ride-hailer Didi through the first $100 billion Vision Fund, which also made outsized investments in Uber and office space firm WeWork.

Didi angered Chinese regulators by pushing ahead with a New York initial public offering and is now traded over-the-counter after delisting.