New anti-trust regulations are wreaking havoc on stock prices for Chinese tech giants once again, as the government keeps pushing against private enterprises.
On Tuesday, August 17, Chinese big tech firms lost $50 billion more in market value as regulators rolled out new rules regarding competition among those companies. The rules announced the same day by China’s State Administration for Market Regulation (SAMR) immediately affected the stocks.
Established in 2018, SAMR has seriously stepped up scrutiny on tech firms in China. This was especially since last year when President Xi Jinping called for control of the “disorderly expansion” of private capital in the Asian giant.
The new set of regulations rolled out by the SAMR include forbidding companies from: entering exclusivity agreements with providers, banning them from selling their products through the company’s competitors, faking reviews and data to enhance their products or hurt their rival’s reputation, or any practice that includes using date or algorithms to prevent customers from running or installing competitor’s services.
Alibaba had already been fined for forbidding providers from dealing with rivals. However, after an investigation earlier this year, the online retailer was given a whopping $2.8 billion fine. In a statement, the SAMR said about this decision that businesses that seriously violate the rules will have to apologize in public and correct their mistake in addition to the fine.
Apart from the sanction on Alibaba, other tech companies like Didi, Tencent, and Meituan were given restrictions or fines for alleged anti-competitive behaviors. In the past nine months, Beijing has cracked down on businesses citing antitrust issues and citing national security concerns or social stability matters; among other industries affected were the banking sector and private tutoring.
Impact on the stock market
Following the announcement on August 17, stocks from affected companies like Alibaba, Tencent, and Meituan had an immediate loss. At close, Alibaba (BABA) lost 4.8%, Tencent (TCEHY) lost about 4%, and Meituan tumbled 3.5%, losses that amounted to $50B in market value.
The entire Chinese regulatory crackdown has sent ripples worldwide, causing losses in markets other than China. It has rattled investors and put considerable doubt on the future of Chinese innovation as well as the ability of their companies to access financial markets abroad.
Are you feeling the bearish sentiment on Chinese companies too? What are your main worries about the Chinese crackdown? Let us know in the comments.
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