Frantic stock sell-offs across sector anticipate new ‘monopoly’ rules, with Alibaba’s shares falling 9.8%
Hundreds of millions of dollars have been wiped off the value of China’s biggest internet companies following two days of frenetic selling with investors fearing Beijing plans to curb the power of homegrown tech firms.
Shares in Alibaba, a Chinese version of Amazon, dropped by 9.8% on Wednesday, while its rivals, Tencent and JD.com, fell by 7.4% and 9.2% respectively.
The share declines coincided with China’s Singles’ Day, an unofficial holiday on 11 November which is billed as the world’s biggest online shopping event. Alibaba and other online retailers can smash sales records for daily trading on the day.
Wednesday was the second day of heavy selling of Chinese tech stocks following the publication of Beijing’s draft plans to “prevent and stop monopolistic behaviours” of internet platforms.
The smartphone maker Xiaomi closed down 8.2%, and shares in the on-demand delivery firm Meituan Dianping also lost 9.7%.
In total more than $280bn has been wiped off the market value of the five Chinese tech heavyweights since Monday. Alibaba and JD.com shares are on track for their worst week ever.
The sell-off was sparked when the State Administration for Market Regulations, China’s top regulator, published plans designed to limit the dominance of the big internet firms and “promote the sustainable and healthy development of the online economy”.
Analysts warned that the plans indicated the Chinese government was changing tack to take firm action against big tech firms. Previously it has left them unhindered and championed them as evidence of Chinese entrepreneurial success.
Jeffrey Halley, senior market analyst for Asia Pacific at the trading firm Oanda, said: “China’s government is concerned about actual or possible monopolistic behaviour and the sheer size of the incumbents either leading to unfair competition or squeezing out new players and reducing competition.” He said the proposed regulations signalled a “much more vigorous regulatory environment”.
The new regulatory action comes a week after the Chinese government intervened to halt the much anticipated initial public offering (IPO) of Ant Group, the country’s biggest financial technology group, which was set to raise $37bn in the world’s largest flotation. Ant Group is controlled by Jack Ma, the billionaire founder of Alibaba and China’s richest man.
Andrew Collier, managing director of Orient Capital Research, described the sudden decision to suspend Ant’s public listing as a disaster. “You don’t yank a $35bn IPO two days before it’s going to be launched internationally, it makes the regulatory system look completely arbitrary and also confused,” Collier told CNBC on Wednesday. “It suggests deep politics within China … that’s bubbled to the surface and they couldn’t resolve [it] ahead of time. Regulation can be positive but this particular move was a disaster.”
The Chinese administration last week summoned 27 internet platforms to discuss regulating the online economy. The platforms called to appear included Alibaba, Bytedance, Tencent, Pinduoduo, Baidu, and JD.com.
The plunge in the value of Alibaba, which owns roughly a third of Ant Group, has wiped hundreds of millions from the paper fortune of Ma. A former English teacher, Ma founded Alibaba in a one-bedroom flat in 1999 and has amassed an estimated $62bn fortune.
Ant Group’s stock-market filing revealed the firm collected 72.5bn yuan ($10.5bn) in revenue in the first half of the year, up nearly 40% on the same period in 2019. Profits were nearly 12 times greater at 21.9bn yuan, underlining how the firm had benefited from the coronavirus lockdown. Ma’s Alibaba owns 33% of Ant Group.