China stock market dynamics
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After investors dumped stocks after Beijing’s regulatory crackdown, Chinese technology stocks listed in the United States will have their worst month since the global financial crisis.
The Nasdaq Golden Dragon China Index, which tracks Chinese technology stocks listed in New York, fell 22% in July, which is expected to record its biggest monthly decline since 2008. Shares of Chinese Internet groups Tencent and Alibaba fell about 16%. % And 10%.
The sharp drop is because Beijing launched Regulatory attack Regarding the reform of companies dealing with large amounts of data and education business, and how Chinese groups are listed on foreign stock markets.
Large Chinese technology stocks fell again on Friday, with Hong Kong’s Hang Seng Technology Index falling 3.3%.
The fall in the stock market this month seems to disturb Beijing.Policy makers tried Reassuring global and domestic investors The avalanche of regulatory and punitive measures does not mean burying China’s largest Internet group, prompting its share price to rise briefly on Thursday before falling on Friday.
Although the authorities privately warned that the listing would be delayed due to data security issues, shortly after the ride-hailing platform Didi Chuxing raised $4.4 billion in its New York IPO at the end of June, Beijing began a crackdown.
On Thursday, there were reports that Didi was considering a privatization. Before the company denied it, its share price had risen by nearly 50% in premarket trading.
People familiar with Didi’s listing said that any move to privatize Didi at or close to the IPO price is mainly beneficial to hedge funds that buy after the listing.
But a large investor who still holds shares in the company said that the move will bring a “substantial recovery of Chinese sentiment” to the market, which is “astonishing” for minority shareholders.
Beijing’s cyber security regulator subsequently announced that it plans to review all overseas listings of Chinese groups with more than 1 million users on the grounds of national security.
China imposed an effective ban on the $100 billion extracurricular tutoring industry over the weekend, sparking concerns about broader crackdowns on overseas-listed technology companies.
Thomas Gateley, an analyst at Longzhou Economics, a research firm, said that although Beijing’s repressive pressure may weaken as policymakers seek to stabilize the market, Chinese Internet platforms “cannot return to the arbitrary expansion of the past few years”.
“Policy makers are increasingly viewing the Internet industry as the source of social problems and security risks, rather than seeing it as a pioneer in national innovation,” he said.
The Shanghai-Shenzhen 300 Index of blue-chip stocks in Shanghai and Shenzhen stocks fell nearly 8% in July, worse than the drop at the beginning of the coronavirus pandemic early last year.
According to calculations by the Financial Times based on Bloomberg data, international investors who trade mainland stocks through links with the Hong Kong market have been net buyers of Chinese stocks in July. For every U.S. dollar withdrawn from Shanghai, foreign investors will invest more than $3 in Shenzhen, thereby increasing foreign holdings of mainland-listed stocks by approximately RMB 10.8 billion (US$1.7 billion).
Shenzhen’s technology-focused ChiNext Index has been one of the best-performing China’s major indexes in the past month, with a decline of only 1%.
Tai Hui, chief Asian market strategist at JP Morgan Asset Management, said investors may shift more Chinese exposure from New York to Hong Kong and the mainland, where semiconductor, solar and biotech stocks have risen. These areas are the key areas of Beijing’s industrial policy.
“Investors dumped all Internet-related stocks and invested all their money in semiconductors,” said Dickie Wong, head of research at Kingston Securities in Hong Kong. “If you invest in China or a company related to China, it is a policy, a policy, a policy.”