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(Nov 11): Chinese tech giants from Alibaba Group Holding Ltd to Tencent Holdings Ltd lost nearly $ 290 billion in market value during two days of frenzied selling as investors scrambled to assess the consequences of the further attempt. Beijing’s broad to curb its most powerful private sector. – Companies in the sector.
Tech stocks fell for a second day after Beijing issued regulations designed to curb the growing influence of internet sector leaders, including JD.com Inc, Meituan and Xiaomi Corp. The Hang Seng Tech Index plunged more than 6% on Wednesday in Hong Kong. your two-day loss at 11%. Shares of the quintet of companies have plunged at least 11% in two sessions.
Beijing unveiled regulations Tuesday to stamp out monopolistic practices in the internet industry, moving away from a largely hands-off approach, while dealing a blow to businesses in the heart of the world’s second-largest economy. The loosely worded edict came a week after new finance restrictions triggered the suspension of Ant Group Co’s $ 35 billion initial public offering, thwarting founder Jack Ma’s ambitions to dominate online finance in the process. They also emerged on the eve of Singles’ Day, the event Ma invented a decade ago that became the nation’s biggest annual shopping spree.
“China’s tech majors will have to rethink their business models,” said Zhan Hao, managing partner of Beijing-based law firm Anjie Law Firm. “The philosophy of Internet companies is that the winner takes all and, especially for platform operators, they get user traffic and build ecosystems that are similar to each other.”
The Xi Jinping government is increasingly reducing the influence of private corporations that have become the country’s main growth engine. Despite sporadic crackdowns in narrow spheres, from mobile games to online counterfeits, companies like Alibaba and Tencent have mostly been free to acquire and invest in startups, becoming key sponsors of prominent startups while They build sprawling empires that now encompass e-commerce and digital finance. , social networks and entertainment.
“I was literally breathless when I first read these guidelines,” said John Dong, a securities attorney at Joint-Win Partners in Shanghai. “The timing, on the eve of Singles’ Day, the forcefulness and determination to remake the tech giants is surprising.”
China’s antitrust watchdog is seeking comment on rules that establish a framework to curb anti-competitive behavior, such as collusion to share confidential consumer data, alliances that weed out smaller rivals, and subsidizing services below. of cost to eliminate competitors. They can also require companies operating a so-called Variable Interest Entity, a vehicle through which virtually all major Chinese Internet companies attract foreign investment and are listed abroad, to apply for specific operational approval.
“The internet giants have expanded their reach to various sectors such as finance and healthcare that are vital to the economy and that really concern regulators,” said Shen Meng, director of boutique investment bank based Chanson & Co. in Beijing. “The move could discourage companies in the tech sector from listing in the short term, as those affected will need time to adjust their businesses accordingly.”
On November 3, lawmakers stunned the investment world by suspending an initial public offering of Ant Group, a fintech company controlled by billionaire Ma. The decision was made just two days before its shares were traded in a listing that attracted at least $ 3 trillion in orders from individual investors. China’s main banking watchdog then redoubled the push to curb fintech companies, vowing on Wednesday to eliminate monopolistic practices and strengthen risk controls.
That is in addition to a series of regulatory pronouncements this week targeting the tech industry. New regulations for the Internet sector signal a “further tightening” of the online economy, although the actual impact will depend on how the rules are applied, JPMorgan Chase & Co analysts led by Alex Yao wrote in a note.
The proposed regulations come at a bad time for tech stocks, which are already under pressure from a global turnover that has sent the Nasdaq Composite Index down nearly 3% this week.
“The tightening of Beijing regulations, including antitrust laws, is a serious blow to the tech giants,” said Daniel So, strategist at Hong Kong-based CMB International Securities Ltd.. “It is an additional blow to equities, when investors fall into old economy equities due to the boost from vaccines,” he said, adding that companies like Tencent and Alibaba will continue to face downward pressure.
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