Jumpy investors brace for next shoe to drop in China regulatory crackdown

People walk past a Tencent sign at the company’s headquarters in Shenzhen, Guangdong province, China, August 7, 2020. REUTERS / David Kirton / File Photo

SHANGHAI, Aug.3 (Reuters) – China’s tech and chip sectors came under further selling pressure on Tuesday after state media attacked the country’s largest social media and video game company, Tencent Holdings Ltd (0700.HK), and regulators have announced that they are launching an investigation into chip distributors in the automotive industry. Read more

The announcement comes days after the securities regulator and state media sought to allay investor fears about the pace and extent of market reform.

The following are quotes from analysts, strategists and market watchers.

ALEX WONG, DIRECTOR, AMPLE FINANCE GROUP, HONG KONG

“We don’t like the recent news on the regulatory side. We are reducing our exposure to sectors that have a higher risk of being regulated. But we are not reducing exposure to Hong Kong much. let’s change our exposure to certain sectors like manufacturing or electric vehicles, or certain consumer brands because they would be less sensitive to policies.

“We have to see if it’s going to turn into something horrible… I think people are used to political risk in China, so they expect some kind of slack if things go really bad. is why the the market is actually not too bad at the moment, but I think the risk is actually quite high this time around because the news keeps coming out. We haven’t seen the end of this wave of regulations, so people will stay away from the higher risk sectors. “

ETHER YIN, PARTNER OF TRIVIUM, BOARD OF DIRECTORS BASED IN BEIJING

“(The stock price moves) have shown how nervous investors are these days. They don’t believe anything is off limits and will overreact, sometimes overreacting, to anything in it. state media that fits the tale of technological repression.

“The government does not want to and cannot get rid of the gaming industry. The official line continues to prevent children from becoming addicted to games. And it has been the policy of the country since 2018. The industry is already subject to heavy regulations, such as an annual quota for new games and a limitation on how long minors can play games. Those restrictions will remain, but there is not much room to be tighter. “

HASNAIN MALIK, HEAD OF EQUITY RESEARCH AT TELLIMER, DUBAI

“China exercises control over its technology sector and this has already led to a very strong devaluation of the largest country in the EM index.

“While there is no reversal of this trend, the substantial discount in the valuation of large-cap technology in China relative to its US peers suggests that it deserves a review, especially given the regulatory risks to come in the United States as well. “

FRANK HAO, ANALYST AT HYWIN WEALTH MANAGEMENT, SHANGHAI

“The general direction of policy oversight is efficiency and fairness. Education and school attendance, which are closely related to the three-child policy, can be subject to strict and continuous supervision and regulation.

“The main objective is to promote the desire to have more children. Therefore, in the area of ​​willingness to have a child, the intensity and continuity of supervision may be stronger in the future, and the industries concerned will be more severely affected. Behind a series of regulations, there is a trend – targeting areas related to people’s livelihoods. “

(This story is passed on to correct the name of the 4th analyst)

Reporting by Andrew Galbraith and Winni Zhou in Shanghai, Tom Arnold in London; Compiled by Vidya Ranganathan; Editing by Muralikumar Anantharaman and Mike Harrison

Our standards: Thomson Reuters Trust Principles.


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