Chinese Tech Stocks Crushed on Fresh Regulatory Pressure

July 26, 2021 6:51 AM EDT

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Shares of major Chinese tech companies, including Tencent (OTC: TCEHY), Tencent Music (NYSE: TME) Alibaba (NYSE: BABA), Pinduoduo (NASDAQ: PDD), and others, are trading sharply lower in pre-open Monday on fresh regulatory pressure from Beijing.

Alibaba and Baidu (NASDAQ: BODU) are both down 4.7%, Pinduoduo over 10%, and JD.COM (NYSE: JD) 5.4% in early Monday trading shares were of these companies closed sharply lower in Asian trading session.

Tencent, another major Chinese tech company, closed 7.7% lower in Hong Kong while Meituan (OTC: MPNGF) nearly 14%. The Hang Seng index in Hong Kong slipped 4.13%.

U.S.-listed Tencent Music is down 15%.

On Saturday, The State Administration for Market Regulation ordered Tencent to give up its exclusive music licensing rights.

“[We will] comply with all the regulatory requirements, fulfill our social responsibilities and contribute to healthy competition in the market,” Tencent responded in a statement.

Educational companies were banned on Friday from raising foreign capital, a decision that sent shares of some companies sharply lower.

“The Chinese government...in a way it's right, they want to put a heavy hand and try to regulate that industry to make it more acceptable. Of course investors...I won't say they suffer. They won't earn that much anymore,” said Louis Tse, managing director at Wealthy Securities in Hong Kong.

Furthermore, reports emerged that China’s central bank requested lenders to raise the rate of mortgage loans for first-time homebuyers.

"We believe China's economy, and specifically its financial system, will face significant risks in coming months due to the unprecedented tightening measures applied to the property sector," economists at Nomura said in a note today.



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