Beijing's regulatory crackdown wipes $1.1 trln off Chinese Big Tech

Sing Tao News

12/07/2023 09:10

By Donny Kwok and Scott Murdoch
       HONG KONG, July 12 (Reuters) - 
    China's major tech companies have shed more than $1 trillion
in value -equivalent to the entire Dutch economy - since the
government's regulatory crackdown on the sector began more than
two years ago, according to Refinitiv data.
    Investors are now hoping the strict rules that have stymied
growth since late 2020 will start to ease, after the People's
Bank of China (PBOC) indicated a change in direction could be
under way.
    The central bank said on Friday most of the main problems
for platform companies' financial businesses had been rectified,
and regulators would shift their focus to the industry as a
whole rather than specific companies.
    The state planner on Wednesday praised Tencent Holdings, the
world's largest video game company  0700.HK , and e-commerce
titan Alibaba Group  9988.HK , for their contributions to
China's tech innovation, in another sign that authorities are
warming to the technology sector once more.
    Analysts pinpoint the shelving of Alibaba affiliate Ant
Group's $37 billion initial public offering (IPO) in November
2020 as the start of a sweeping regulatory crackdown on mainland
China's tech firms, which had grown rapidly in size and
influence.
    Since then, roughly $1.1 trillion has been wiped from the
market capitalisation of the Hong Kong-listed stock of Alibaba
Group, Tencent, Chinese food delivery giant Meituan  3690.HK  ,
search engine provider Baidu Inc  9888.HK  and e-commerce site
JD.com  9618.HK .  
    Share prices for the five companies have plunged between
40.4% and 71% during that time. 
    
    Technology stocks  .HSTECH  in Hong Kong have rallied 4.1%
since Monday as investors bank on an easing regulatory
environment to boost earnings, but some analysts have sounded a
note of caution.
    "Mega-cap tech companies will allocate increasingly large
amounts of capital expenditure towards developing generative AI
technologies and products in a hostile external environment,
potentially impacting profitability," said Redmond Wong, Saxo
Markets strategist in Hong Kong.
    Steven Leung, UOB Kay Hian sales director, said current
valuations would last "until we see more supporting policies
from authorities".

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Value destruction    https://tmsnrt.rs/44D1Ds3
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 (Reporting by Donny Kwok in Hong Kong and Scott Murdoch in
Sydney; Editing by Kevin Liffey)
 ((Scott.Murdoch@thomsonreuters.com;))