HONG KONG (BLOOMBERG) - Chinese technology shares tumbled for a second day after Beijing clamped down on the internet industry, wiping out more than US$200 billion (S$269 billion) of value.
The Hang Seng Tech Index slumped 2.5 per cent on Wednesday (Nov 11) in Hong Kong, taking its two-day loss to 7.5 per cent. Shares of Alibaba Group Holding, Tencent Holdings, JD.com, Meituan and Xiaomi slumped at least 5.8 per cent in two days after the Communist Party unveiled regulations to root out monopolistic practices in the internet industry.
Tech is the latest industry to be targeted by Beijing after new curbs on the finance sector that triggered the shock suspension of Ant Group's US$37 billion initial public offering.
While Xi's government has been steadily tightening its grip on the world's second-largest economy, it has until recently taken a relatively hands off approach toward businesses that dominate China's burgeoning internet, e-commerce and digital finance industries. Authorities are concerned the companies have become too powerful, according to Ma Chen, a Beijing-based partner at Han Kun Law Offices.
"This is a watershed moment," said Mr Ma, who specializes in antitrust.
Alibaba, Ant and Tencent alone commanded a combined market capitalization of nearly US$2 trillion before last week, easily surpassing state-owned behemoths like Bank of China as the country's most valuable companies.
Wednesday's selloff sent Alibaba shares down another 7 per cent to its lowest since August in Hong Kong, while analysts have estimated that Ant's US$280 billion valuation could be cut in half due to stricter regulations. That's after Alibaba's 5 per cent decline on Tuesday. Both companies were co-founded by billionaire Jack Ma, China's most celebrated businessman.
Tencent, the gaming to payments giant whose rise turned co-founder Pony Ma into China's richest man, fell as much as 6 per cent on Wednesday in Hong Kong after sinking 4.4 per cent the previous day. Meituan, the food-delivery start-up that has since expanded into hotel bookings and movie tickets, dived a further 6 per cent before paring losses. It had tumbled 10.5 per cent on Tuesday.
China's antitrust watchdog is seeking feedback on a raft of regulations that establish a framework for curbing anti-competitive behavior such as colluding on sharing sensitive consumer data, alliances that squeeze out smaller rivals and subsidizing services at below cost to eliminate competitors. They may also require companies that operate a so-called Variable Interest Entity - a vehicle through which virtually every major Chinese internet company attracts foreign investment and lists overseas -- to apply for specific operating approval.
The latest proposal follows heightened scrutiny of technology companies worldwide, as regulators investigate the extent to which internet giants from Facebook to Alphabet's Google can leverage their dominance. Consumers in China have in recent years protested against the gradual erosion of their privacy via technology from facial recognition to big data analysis.
Beijing is increasingly seeking to diminish the influence that a handful of its tech corporations wield over vast swathes of the economy. It investigated Tencent's music arm's exclusive agreements with publishers last year and, most recently, modified regulations to rein in risk at fast-growing micro-lending entities such as Ant Group. The latter step derailed Ant's planned IPO last week, before it was to complete what would have been the world's largest such offering on record.
The new rules were proposed in accordance with and build on China's Anti-Monopoly Law, which in January included broad language governing internet companies for the first time. They restrict targeting specific customers through their online behavior, a common practice adopted by players both at home and abroad. Under the regulations unveiled by the State Administration of Market Regulation, violators may be forced to divest assets, intellectual property or technologies, open up their infrastructure and adjust their algorithms. The watchdog will seek public feedback on the regulations till Nov. 30.
Representatives from Alibaba, Tencent, TikTok-owner ByteDance and 24 other tech giants attended a meeting with regulators from the antitrust and cyberspace authorities earlier this month to discuss issues ranging from unfair competition to counterfeiting. "Internet platforms are not outside the reach of antitrust laws, nor are they the breeding ground for unfair competition," the regulators said in a subsequent statement.
Further measures to tighten oversight of the tech companies may be in the offing. Regulators plan to release new rules governing internet transactions by June 2021, according to a State Council statement released on Tuesday.