Hundreds of millions of dollars have been wiped off the value of China’s largest internet companies after two days of frantic sales with investors fearing Beijing is considering slashing the power of local tech companies.
Shares of Alibaba, a Chinese version of Amazon, fell 9.8% on Wednesday, while rivals Tencent and JD.com fell 7.4% and 9.2% respectively.
The decline in the share coincided with Singles Day in China, an unofficial holiday on Nov. 11, considered the world’s largest online shopping event. Alibaba and other online retailers can break sales records for same-day daily trading.
Wednesday was the second day of a massive sell-off of Chinese technology stocks after the publication of Beijing’s draft plans to “prevent and stop monopoly behavior” by Internet platforms.
Smartphone maker Xiaomi closed 8.2% lower, and shares of on-demand delivery company Meituan Dianping also fell 9.7%.
In total, more than $ 280 billion has been erased from the market value of China’s five tech heavyweights since Monday. Alibaba and JD.com shares are on track for their worst week.
The sale was sparked when the State Administration for Market Regulation, China’s main regulator, released plans to limit the dominance of large Internet companies and “promote the sustainable and healthy development of the economy by line”.
Analysts have warned that the plans indicate the Chinese government is shifting tactics to take firm action against big tech companies. Previously, he left them unfettered and championed them as proof of Chinese entrepreneurial success.
Jeffrey Halley, Senior Market Analyst for Asia-Pacific at Trading Company Oanda, said: “The Chinese government is concerned about actual or possible monopolistic behavior and the sheer size of incumbents which lead to unfair competition. or which crowd out new players and reduce competition. He said the proposed regulations signaled a “much stronger regulatory environment”.
The new regulatory move comes a week after the Chinese government intervened to end the much-anticipated Initial Public Offering (IPO) of Ant Group, the country’s largest financial technology group, which was expected to raise $ 37 billion. dollars in the world’s largest IPO. Ant Group is controlled by Jack Ma, the billionaire founder of Alibaba and the richest man in China.
Andrew Collier, managing director of Orient Capital Research, described the sudden decision to suspend Ant’s public listing as a disaster. “You don’t pull out a $ 35 billion IPO two days before it’s international launch, that makes the regulatory system completely arbitrary and confusing,” Collier told CNBC on Wednesday. “This suggests a deep policy in China … which has surfaced and they have not been able to resolve [it] in advance. Regulation may be good, but this particular decision was a disaster.
The Chinese administration convened 27 internet platforms last week to discuss regulating the online economy. Platforms set to appear included Alibaba, Bytedance, Tencent, Pinduoduo, Baidu, and JD.com.
The fall in value of Alibaba, which owns about a third of Ant Group, wiped out hundreds of millions of dollars from Ma’s paper fortune. A former English teacher, Ma founded Alibaba in a one-bedroom apartment. room in 1999 and amassed a fortune estimated at $ 62 billion.
Ant Group’s stock market filing found the company raised 72.5 billion yuan ($ 10.5 billion) in revenue in the first half of the year, up nearly 40% from at the same time in 2019, how the company benefited from the coronavirus lockdown. Ma’s Alibaba owns 33% of Ant Group.