China education firms see no immediate impact from draft law

Wisdom Education International Holdings

14/08/2018 06:35

HONG KONG, Aug 14 (Reuters) - Chinese schools operator
Wisdom Education International Holdings  6068.HK  said on
Tuesday it did not expect a draft law related to the private
education sector to have an impact on it, as it seeks to
reassure investors after its shares plunged.
    The statement came a day after Wisdom's shares led falls in
Hong Kong-listed education firms after China released a draft of
revised private education regulations that could bar some
companies from growing through mergers and acquisitions. 
    "The group has not been affected by the draft amendments in
any material respect as at the date of this announcement, and
the company currently does not expect that the draft amendments
will have any material negative impact on the group based on its
preliminary assessment," chairman Liu Xuebin said in a
statement.
    The Ministry of Justice released the draft amendment related
to promoting private education late on Friday, which included
incremental government support for private schools and the
standardisation of setting up and operating private schools. (https://bit.ly/2P53OPp)(https://bit.ly/2MFUIqD)
    Jefferies said imprecise terms and language in the draft
legislation had spooked the market and it expected further
clarification in the next draft. 
    On Monday, Wisdom's stock slid 38 percent to its lowest in
eight months. Shares of Tianli Education  1773.HK  and China
Yuhua Education  6169.HK , both plunged over 30 percent.
    Wisdom shares rebounded 16 percent on Tuesday after its
announcement, while Tianli climbed 2 percent and Yuhua rose 4
percent.  
    "The board notes that the draft law remains in draft form
and is yet to be promulgated," Yuhua's chairman Li Guangyu said
in a statement, adding the firm would monitor developments.
    Nomura said in a research note the regulation had created
uncertainty as it stated that education groups were not allowed
to control not-for-profit schools through mergers and
acquisitions, and the change would hinder purchasing via equity
interest.
    "The company is not yet in the position to assess the impact
of the amendment law on its operation due to the ambiguity in
the draft amendment law and the uncertainty in the legislative
timetable of the amendment law," Tianli chairman Luo Shi said in
a statement. 
    "The draft amendment law is not a final draft and has not
been approved or has not taken effect yet," Luo said. 
    Shares of Hong Kong-listed education companies, including
Mapleleaf Education  1317.HK , New High Education  2001.HK ,
Hope Education  1765.HK , China Education Group  0839.HK , China
Xinhua Education  2779.HK  and Minsheng Education  1569.HK  also
dived on Monday, falling between 20 and 30 percent. 
    Many of the stocks had rebounded on Tuesday. 
    U.S.-listed Bright Scholar Education  BEDU.N , TAL Education
 TAL.N , Puxin  NEW.N , New Oriental Education & Technology
Group  EDU.N , Rise Education Cayman Ltd  REDU.O , and RYB
Education Inc  RYB.N  were also hit on Monday.  urn:newsml:reuters.com:*:nL4N1V44KD

    
         

 (Reporting by Donny Kwok
Editing by Robert Birsel)
 ((donny.kwok@thomsonreuters.com; +852 2843 6470; Reuters
Messaging: donny.kwok.reuters.com@reuters.net))