China’s Biggest Tech Stocks Suffer Historic Plunge As Beijing’s Crackdown On Billionaires Continues
Courtesy of ZeroHedge View original post here.
Though the mass resignation of pro-democratic lawmakers from Hong Kong's LegCo will likely dominate China-related headlines in the west on Wednesday, it's notable that Chinese tech stocks took a serious beating during today's session, with the sector losing almost $254 billion in value as banking watchdog focuses on fintech monopolies.
The tech-heavy ChiNext index in Shenzhen fell 2.9%, while Shanghai’s Star 50 index dropped 2.7% on Wednesday, after a top official with the China Insurance and Banking Regulatory Commission said he would be taking a "close look" at fintech monopolies. The selloff stretched to Hong Kong, where shares in Alibaba dropped 8.3%, extending the company's two-session loss to 13%.
Source: FT
Of course, this shouldn't be a surprise, even for westerners, since the CCP has already telegraphed its intentions to rein in China's tech billionaires before they become too powerful to control. We delved into the issue in greater detail on Tuesday, after Beijing released some new "details" of new anti-trust policies, which are being bolted on to a sweeping anti-monopoly law passed in China earlier this year.
The latest comments from Liang Tao, vice-chair of the CBIRC added to downward pressure on stocks this week from China’s competition watchdog. “In areas where market monopoly problems exist, we should learn from international experience, strengthen our anti-monopoly examinations and ensure that a fair market order is maintained,” Mr Liang told attendees on Wednesday at a finance summit in Beijing. The day prior, the State Administration for Market Regulation, China’s competition watchdog, published new rules targeting behaviour including the use of exclusivity clauses to hinder competition, treating customers differently based on their spending data and forcing them to buy bundles of products to access those they want.
As we noted at the time, the CCP's decision to unilaterally cancel the Ant Financial IPO in Shanghai marked a watershed moment in terms of how the party has dealt with billionaires like Jack Ma. Finally, after years of promulgating the liberal credo "to get rich is glorious," China's all-powerful Communists are apparently getting back to their "eat the rich" roots.
The antitrust issues involving China's tech leviathans mirror the anti-trust push in the US, as Big Tech has provoked a full-court anti-trust press from the DoJ. But the differences between the two countries political systems mean that the antitrust debates have vastly different stakes. Alibaba's platform is used to sell fully one-fifth of the consumer goods bought and sold in the world's largest country. Tencent's WeChat app even provoked an attack from the Trump Administration. In China, the app, both the messenger and its payment platform, is ubiquitous.
That all poses a problem for the CCP, since control over such vast swaths of the economy automatically gives these companies and their leaders enormous political clout as well.
Circling back to Wednesday's selloff, the move was provoked by comments from Liang Tao, vice chair of the CBIRC.
The latest comments from Liang Tao, vice-chair of the CBIRC added to downward pressure on stocks this week from China’s competition watchdog. "In areas where market monopoly problems exist, we should learn from international experience, strengthen our anti-monopoly examinations and ensure that a fair market order is maintained," Mr Liang told attendees on Wednesday at a finance summit in Beijing. The day prior, the State Administration for Market Regulation, China’s competition watchdog, published new rules targeting behaviour including the use of exclusivity clauses to hinder competition, treating customers differently based on their spending data and forcing them to buy bundles of products to access those they want.
Some analysts told the FT that the scenario isn't 'doomsday' for these stocks by any stretch. one analyst described the move as more of a warning shot than a kill shot.
But traders in Shanghai were sceptical the new rules meant doomsday for China’s most successful companies.
"This is just a way of [Beijing] saying, [to] all the big companies: 'You have to play ball by our rules even if you are a giant like Ant Group — you all need to fall in line with directions from the authorities,'" said a trader at one Chinese brokerage.
And that might be true, but once the CCP knocks somebody down, it typically doesn't simply just let them get back up. The same is true with stocks. China's National Team could have probably intervened to turn the selloff around anytime it wanted. Because in China's centrally planned markets, volatility isn't driven by market forces, but by the whims of the Party, and selloffs only serve to reinforce the illusion of control.
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