China tech stocks fall as regulators step up antitrust pressure thumbnail

China tech stocks fall as regulators step up antitrust pressure

Chinese technology companies have lost almost $290bn in market value over two days after the government launched new antitrust rules.

The tech-heavy ChiNext index in Shenzhen fell 3.3 per cent and Shanghai’s Star 50 index dropped 3.2 per cent on Wednesday after a top official with the China Banking and Insurance Regulatory Commission (CBIRC) promised to look closely at fintech monopolies.

The sell-off for Chinese tech stocks extended to Hong Kong, where the Hang Seng Tech index tumbled 6.3 per cent.

Hong Kong-listed shares in Alibaba dropped 9.8 per cent, taking them 14.4 per cent lower over the last two sessions and carving almost $117bn off the company’s market capitalisation.

Rivals Tencent and JD.com shed 11.4 per cent and 17.2 per cent during the same period, respectively, while food delivery group Meituan fell 19.2 per cent. Xiaomi, which has surpassed Apple as the world’s third-largest smartphone maker, was also down 12.1 per cent over the two days.

The renewed antitrust attention on tech companies comes as the groups exert an increasingly strong influence on daily life in China, where a fifth of the country’s consumer goods are now sold on Alibaba.

Bar chart of market cap lost since new antitrust regulations were announced ($bn) showing how the new rules have hit China’s top tech stocks

Last week, Chinese regulators halted the $37bn initial public offering of Ant Group, Alibaba’s payments and lending arm, after publishing new proposed rules for online credit. Last month, Beijing released its first draft of a comprehensive law on personal data protection.

The latest comments from Liang Tao, vice-chair of the CBIRC added to downward pressure on stocks this week from China’s competition watchdog.

“In areas where market monopoly problems exist, we should learn from international experience, strengthen our anti-monopoly examinations and ensure that a fair market order is maintained,” Mr Liang told attendees on Wednesday at a finance summit in Beijing.

The previous day, the State Administration for Market Regulation, China’s competition watchdog, published new rules targeting behaviour including the use of exclusivity clauses to hinder competition, treating customers differently based on their spending data and forcing them to buy bundles of products to access those they want.

“Looking at the proposed guidelines, we believe if some of these were to be passed and implemented, it could affect the development of the industry,” said Alicia Yap, managing director and head of pan-Asia internet research at Citigroup.

Ms Yap said that the rules could limit targeted ads and product recommendations used by almost all ecommerce platforms, while rules on “forced exclusivity” could hit Meituan, which has in the past required restaurants not to list on competing platforms.

But traders in Shanghai were sceptical the new rules were so dire for China’s most successful companies.

“This is just a way of [Beijing] saying, [to] all the big companies: ‘You have to play ball by our rules even if you are a giant like Ant Group — you all need to fall in line with directions from the authorities’,” said a trader at one Chinese brokerage.

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