Hong Kong stocks battered again by China crackdown

HONG KONG: Hong Kong shares plunged more than 5 per cent on Tuesday (Jul 27), extending the previous day's hefty losses on worries about a regulatory crackdown by China impacting a range of industries including private education and technology.

The Hang Seng Index tumbled more than 5 per cent at one point before ending down 4.22 per cent, or 1,105.89 points, at 25,086.43 - having lost a similar amount on Monday. It has now given up almost 10 per cent in three trading days.

Mainland markets fared only a little better. The benchmark Shanghai Composite Index sank 2.49 per cent, or 86.26 points, to 3,381.18, while the Shenzhen Composite Index on China's second exchange shed 3.33 per cent, or 80.38 points, to 2,331.43.

READ: China's private education firms brace for hit from new rules, shares tumble

Investors in Hong Kong have been sent scurrying for cover after Beijing at the weekend announced a series of measures that will tighten its grip on the world's number two economy.

Private tutorial firms were strafed on Monday after officials said they would stop approving new after-school education institutions, while all existing ones must now register as non-profits, saying the industry has been "hijacked by capital".

The private education sector was worth US$260 billion in 2018 according to consultancy and research firm L.E.K. Consulting, driven by China's hyper-competitive kindergarten-to-university education system in oversubscribed cities.

But analysts said the new plans would make the firms already listed - some of them in New York - uninvestable.

READ: China forces tutoring companies to go non-profit

READ: China jitters drag Asian stocks to seven-month low

Shares in New Oriental Education & Technology Group Inc. lost close to 9 per cent after plunging 47 per cent Monday, while Koolearn Technology Holding Ltd dropped more than 3 per cent and China Maple Leaf Educational Systems fell 8 per cent.

On Monday, Koolearn fell 33 per cent and Maple Leaf lost 10 per cent.

The crackdown on the private education sector resembles authorities' move to rein in China's tech giants, taking aim at monopolistic behaviour and imposing huge fines against firms.

On Saturday, the market regulator said Tencent had violated antitrust laws, compelling it to relinquish its exclusive music label rights.

Technology firms, which have for months been in the crosshairs of Beijing as it looks to check their outsized power among China's consumers, were also among those being hammered.

Tencent shed 9 per cent and Alibaba dived more than 6 per cent. Tencent lost more than 7 per cent Monday and Alibaba shed more than five.

Meanwhile, food delivery giant Meituan collapsed more than 17 per cent, having been knocked for 14 per cent on Monday, after new rules were issued by China's market regulator to ensure workers' incomes are above minimum salary levels.

Companies must also "appropriately relax delivery time limits" in a notoriously frenetic delivery sector that is an artery of life in China's cities.

Shares in Hong Kong Exchanges and Clearing, which operates the city's market, plunged more than 6 per cent.

CMB International Securities strategist Daniel So added: "The key concern now is whether regulators will do more and expand the crackdown to other sectors.

"The regulatory concerns will be the key overhang to the market for the second half."