[Asia Economy Reporter Ji Yeon-jin] As concerns over policy risks targeting platform companies by the Chinese government grow, there are increasing recommendations to exercise caution when investing in related stocks.
According to the financial investment industry on the 28th, Alibaba ADR fell 2.97% compared to the previous day on the New York Stock Exchange on the 27th (local time), and Tencent also dropped 2.34%. Didi Chuxing closed flat. In the case of Didi Chuxing, China's largest ride-sharing company, its stock price has fallen by 43.22% since its U.S. listing on the 30th of last month.
The Chinese government’s successive regulatory measures on data security and antitrust targeting internet companies this month have dealt a direct blow to related stocks. The decline in Chinese platform stocks listed on the Hong Kong Stock Exchange is even greater. Alibaba fell 9.6% over the past two days, Tencent -12.46%, Baidu -11.73%, and JD.com -13.01% in returns.
China’s fintech and antitrust regulations, which began last year with the withdrawal of Alibaba’s Ant Group IPO, have been strengthened into supervisory regulations on data security and overseas listings following Didi Chuxing’s U.S. stock market debut last month. In particular, antitrust regulatory measures are spreading from Alibaba to other platform companies, and there is speculation that the scope of regulations may expand beyond data protection into other areas. The market also anticipates that Meituan, China’s largest food delivery platform, could become a target of the Chinese government.
The financial investment industry warns that although these Chinese government regulations are not expected to fundamentally damage the competitiveness of internet companies, the increased stock price volatility due to regulatory risks calls for a conservative approach.
Baek Seung-hye, a researcher at Hana Financial Investment, said on the day, "This year, large internet companies such as Alibaba and Tencent are likely to enter a new investment cycle to strengthen competitiveness through technological innovation and increased marketing expenditures, as aggressive mergers and acquisitions and growth through market dominance are restricted." She added, "In the short term, strong quarterly earnings could trigger a stock price rebound, but since investment expansion and government regulations have lowered earnings visibility, a conservative approach until quarterly results are confirmed is reasonable."
Han Jeong-sook, a researcher at Mirae Asset, also stated, "With additional business expansion of Chinese platform companies being halted, it is difficult to expect high profit growth in the future," and added, "Not only have internet companies found it difficult to raise funds through overseas listings, but concerns over delisting of companies listed in overseas markets are also increasing."
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