(Bloomberg) -- Chinese stocks extended their slide from a three-year high, with investors citing a lack of fresh catalysts after a blistering rally.

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The Hang Seng China Enterprises Index closed down 2.3%, taking its two-day drop to 4.6%, the steepest since Oct. 9. Technology shares bore the brunt of the selling after powering the market for most of the year. Xiaomi Corp. and Alibaba Group Holding Ltd. lost more than 3% each. Onshore, the CSI 300 Index dropped 1.5%.

Bearish calls have also started to crop up, with BofA Securities warning this week of a “meaningful correction soon.” Morgan Stanley sees volatility ahead, noting that onshore investor sentiment has cooled. The caution suggests the market has priced in the positives that emerged from the National People’s Congress earlier this month, when authorities pledged to support economic expansion and AI development.

While tech earnings have been largely upbeat this season, share reactions have been mixed as expectations were high. This year’s rally, which saw the Hang Seng China gauge reach its highest since late 2021 on Tuesday, has also taken valuations above historical averages. The index is trading at 10 times its forward earnings estimates, compared to a five-year average of 8.5.

Profit-taking pressure is rising on Hong Kong-listed tech stocks following their earnings, Alvin Ngan, an analyst at Zhongtai Financial International Ltd., wrote in a note. “The valuation gap between Chinese and US tech stocks has significantly narrowed after a correction in US stocks.”

The Hang Seng Tech Index dropped 3.4% on Friday, trimming this year’s gain to 26%.

Onshore investor sentiment has also dropped in the past week, reflected in lower trading volumes, Morgan Stanley strategists led by Laura Wang wrote in a note. They expect to see some volatility in the earnings season.

Tech earnings are nearing the tail end with only a few companies left to report. BYD Co. — one of this year’s biggest stock winners — tumbled more than 7% in Hong Kong before results due next week.

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On Friday, food delivery leader Meituan reported a 20% jump in quarterly revenue. Earlier this week, Xiaomi Corp. hiked its 2025 delivery target, while Tencent’s revenue rose a better-than-projected 11% in the final quarter and net income almost doubled.