[ad_1]
Wed, Nov 11, 2020 – 11:02 am
The Hang Seng Tech Index slumped 3.9 percent on Wednesday in Hong Kong, taking its two-day loss to nearly 9 percent. Shares of Alibaba Group, Tencent, JD.com, Meituan and Xiaomi plunged at least 8 percent in two days after the Communist Party unveiled regulations to stamp out monopolistic practices in the internet industry.
Technology is the latest sector Beijing is targeting after new restrictions on financial firms that triggered the shock suspension of Ant Group’s sale of US $ 35 billion shares last week. The Xi Jinping government is increasingly reducing the influence of private corporations that dominate its burgeoning internet, e-commerce and digital finance industries, moving away from its previous hands-off approach.
“I literally took my breath away when I first read these guidelines,” said John Dong, securities attorney for Joint-Win Partners in Shanghai. “The timing – on the eve of Singles Day – the forcefulness and determination to remake the tech giants is amazing.”
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 large 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 Chanson & Co., with headquarters in Beijing. “The move could discourage companies in the technology 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 owned by billionaire Jack Ma. The decision was made just two days before the shares began trading at a listing that attracted at least $ 3 trillion in orders from individual investors.
Liang Tao, vice chairman of the China Banking and Insurance Regulatory Commission, said on Wednesday that the country will also strengthen its antitrust examinations of the fintech sector.
New regulations for the Internet industry 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 nearly 3% this week.
“The tightening of Beijing regulations, including antitrust laws, is a serious blow to the tech giants,” said Daniel So, a strategist at Hong Kong-based CMB International Securities Ltd.
“It’s an additional hit for equities, when investors are exiting the sector into old economy equities due to the momentum of the vaccine,” he said, adding that firms such as Tencent and Alibaba will continue to face downward pressure.
BLOOMBERG
[ad_2]
