International investor concerns mount over China's tech rout

Scholar Education

27/07/2021 20:14

By Marc Jones
    LONDON, July 27 (Reuters) - International investors were
feeling bruised and uncertain on Tuesday as a third day of heavy
selling hammered China's top tech stocks and began to seep into
currency and debt markets.
    China's rise in global indexes in recent decades means money
managers are more exposed than ever as Beijing seeks to reduce
the dominance of some of its tech, property, ride-hailing and
even private education firms. 
    Tuesday's falls included a 9% plunge in internet giant
Tencent, its worst in a decade, as its WeChat social network
suspended user registrations while it underwent an upgrade "to
align with all relevant laws and regulations".  urn:newsml:reuters.com:*:nL1N2P30EN
    China's blue-chip index  .CSI300  dropped to its lowest in
nearly eight months, the yuan hit its lowest since April and 
Hong Kong slumped 5%.
    In U.S. trading, the Nasdaq Golden Dragon China  .HXC 
benchmark of Chinese tech stocks listed in New York fell another
6%, taking its losses since Friday past 20% and wiping $500
billion off its value.  .N  
    "The spectre of state intervention into controlling the
private sector has created a crescendo of panic selling," said
Sean Darby at Jefferies, calling it an iron fist in a velvet
glove.
    William Russell, Head of Product Specialists Equity at
Allianz Global Investors, said the moves had left investors
blindsided. 
    "A key question is what are policymakers in China trying to
achieve?" Russell said. One thing was clear, he said: Beijing
wanted to prevent companies becoming too dominant.   
    China is readying a Personal Information Protection Law
which calls for tech platforms to impose stricter measures to
ensure secure storage of user data.  urn:newsml:reuters.com:*:nB9N2OE015
    Beijing-based tech consultant Zhou Zhanggui said investors
were over-reacting to the "rectification" of Chinese tech
companies.
    The Institute of International Finance (IIF) estimated that
China's equity markets suffered outflows of $600 million on
Tuesday after bleeding $2 billion on Monday.  urn:newsml:reuters.com:*:nL8N2P35PV
    Monday's selloff was triggered by a clampdown on the
$100-billion private education industry which sent shares of
tutoring providers such as New Oriental Education & Tech Group
and Scholar Education Group down more than 45%.
    U.S. ETF firm ARK Invest, headed by celebrity fund manager
Cathie Wood, said it had dumped shares of Alibaba  BABA.N ,
Baidu  BIDU.O , JD.com  JD.N , Tencent  TCEHY.PK , KE Holdings
 BEKE.N  and Byd  BYDDY.PK . 
    The firm has also begun cutting stakes in JD.com  JD.N  and
game-streaming company Huya  HUYA.N  since Beijing launched a
crackdown on ride-hailing company Didi Global  DIDI.N .
    Tuesday's heavy falls in Asia also included delivery
platform Meituan, which dropped 17%, and ecommerce company
Alibaba, which tumbled nearly 8%  .SS 
    Tencent and Alibaba account for 10% of MSCI’s $8 trillion
Emerging Market index  .MSCIEF . Chinese firms make up around
37% of the index, up from 17% a decade ago.
    Investment banks estimate U.S. investors hold about $1
trillion of Chinese internet and tech stocks, or have U.S.
listings known as American Depositary Receipts (ADRs) that
Washington has also been clamping down on over the past year.   
    "It's definitely a reminder to investors of the risks in
emerging markets," said Gael Combes, Head of Fundamental
Research Equities at Unigestion. 
    While the market had known state-owned enterprises were used
to pilot the economy, "the tech, internet and fintech companies
were valued close to the valuation we'd have in the U.S., and so
didn't discount the regulatory risk," he said.
    AXA's Sailesh Lad said fixed income markets were also
affected.
     Chinese 10-year government bond futures  CFTc1  were down
0.35%. Bonds in property company Evergrade have now halved in
price since late May amid concern about its future.
    On contagion risk, investment firm Mirabaud underlined that
other than Tencent's founders, only one Chinese institution is
on the list of its top 20 shareholders.
    Alibaba's biggest shareholder is Softbank, the U.S. ADR top
20 list is full of U.S. and international funds, and the HK
listing is also dominated by international institutions. There
is also no Chinese institution in the top 25 holders of the
third of the BATs trio, Baidu.
   
  

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Chinese stocks in U.S. take a beating    https://tmsnrt.rs/375Yu8q
Tutoring crackdown slams U.S.-listed Chinese stocks Tutoring
crackdown slams U.S.-listed Chinese stocks    https://tmsnrt.rs/36YUVks
Chinese stocks in U.S. tumble from February highs    https://tmsnrt.rs/3l6nW5Z
BATs vs FAANGs    https://tmsnrt.rs/3kYKzJF
China fears    https://tmsnrt.rs/2Wsmwsn
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Additional reporting by Medha Singh, Saqib Ahmed, Danilo
Masoni, Sujata Rao and Karin Strohecker in London and Rodrigo
Campos in New York, Editing by Timothy Heritage)
 ((marc.jones@thomsonreuters.com; +44 (0)20 7513 4042; Reuters
Messaging: marc.jones.thomsonreuters.com@reuters.net  Twitter
@marcjonesrtrs))