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China stock market dynamics

After Beijing’s regulatory authorities cracked down on global investors to sell stocks, 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, and is expected to record its biggest monthly decline since 2008. The share prices of Chinese internet conglomerates Tencent and Alibaba fell about 16 and 10%, respectively.

As Beijing launched a regulatory attack on the company, the stock price fell sharply Processing large amounts of data and Education, And the reform of 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.Policymakers tried Reassuring global and domestic investors The avalanche of regulation and punishment does not mean burying China’s largest Internet group, prompting its share price to rise briefly on the Thursday before the fall on Friday.

Shortly after taxi-hailing platform Didi Chuxing raised $4.4 billion in its IPO in New York at the end of June, Beijing began a crackdown, despite the authorities’ private warnings that the listing was delayed due to data security issues.

On Thursday, there were reports that Didi was considering a privatization. Before the ride-hailing company denied it, its share price rose 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 cybersecurity 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 the research firm Longzhou Jingxun, said that although Beijing’s repressive pressure may weaken as policymakers seek to stabilize the market, Chinese Internet platforms “will not 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, which was even worse than the drop at the beginning of the Covid-19 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 was one of China’s major indexes that performed best last month, falling only 1%.

Tai Hui, chief Asian market strategist at JPMorgan Chase 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.”

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