China stock market dynamics
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After the strict new restrictions on private education companies shocked the market, Chinese securities regulators tried to calm the concerns of international investors and banks.
According to three people familiar with the matter, Beijing’s regulators held a conference call with senior executives from global investors, Wall Street Bank and China Financial Group on Wednesday night. One of the people familiar with the matter said that about 12 people attended the meeting, including executives from BlackRock, Fidelity, Goldman Sachs and JPMorgan Chase.
After China issued an effective ban on the $100 billion tutoring industry over the weekend, the call tried to appease these groups.
The news of the conference call boosted the Chinese stock market, which suffered a heavy week in a series of regulatory actions. As the broader Hang Seng Technology Index rose 7%, shares in Hong Kong-listed Internet conglomerates Tencent and Alibaba rose 8.4% and 6.7%, respectively.
China’s Shanghai and Shenzhen 300 Index rose 1.5%, while the technology-focused ChiNext Index rose 3.7%.
A person familiar with the conference call hosted by the China Securities Regulatory Commission said that this shows that the Chinese government is not “completely turning a blind eye to the sentiments of international investors,” but added that it has not taken much action to alleviate concerns about future regulatory policies.
“These policies do not come from the Securities Regulatory Commission, but from a higher level. Obviously, there will be more in the future, which is obvious to everyone,” the person said.
According to people familiar with the matter, during the conference call, Fang Xinghai, vice chairman of the China Securities Regulatory Commission, told the International Group that China is committed to allowing companies to enter the capital market and that the actions taken against education technology companies are isolated.
The person said that many people asked the China Securities Regulatory Commission whether the regulator would target the “variable interest entity” structure adopted by many large Chinese technology groups in overseas listings. However, the person said that these questions have not been clearly answered.
The crackdown on tutoring companies includes restricting their ability to use the VIE structure, which technology companies such as Alibaba and Pinduoduo also use to list in the United States. This structure, which is not legally recognized in China, allows global investors to bypass the control of foreign ownership of certain industries in China.
Latest restrictions on tuition group Cause concern Regulators can target this structure more broadly.
Fang said that when the Financial Times contacted him, he was not interested in talking to reporters.
A person close to the China Securities Regulatory Commission said that regulators “did not expect this policy to have such a big impact on investor sentiment. [are] Passionate about sending messages, business as usual. .. But everyone feels that the crackdown is too strong and there is no regulatory boundary. Investors will have to reprice future China risks.”
Over the past month, Beijing’s regulatory pressure on technology groups has escalated rapidly. The authorities have initiated a comprehensive reform of the overseas listing of Chinese companies, and the Chinese cybersecurity regulator has announced plans to review all overseas listings of groups with more than 1 million users on the grounds of national security.
The new cybersecurity rules were announced a few days after the ride-hailing app Didi Chuxing raised $4.4 billion in its New York IPO last month. Its stock price has fallen 40% since then.
These actions sparked a scramble on Wall Street Redirect IPO Chinese companies from New York to Hong Kong.Since the Didi incident worries global investors, the U.S. has not yet approved major transactions from Chinese conglomerates Huge loss.
On Tuesday, Tencent announced the suspension of user registration for its flagship WeChat app, and at the same time upgraded its security technology to “compliance with all relevant laws and regulations”, which further shocked the market.
After the Shanghai and Shenzhen stock markets fell sharply, Chinese state media tried to reassure investors. An article published by Xinhua News Agency on Wednesday stated that the China Securities Regulatory Commission maintains an “open attitude” to the listing of Chinese companies.
BlackRock, Fidelity and JPMorgan Chase did not immediately respond to requests for comment. Goldman Sachs declined to comment.
Additional reporting by Edward White and Ryan McMorrow