Premarket stocks: China’s escalating crackdown on business is moving stocks

Premarket stocks: China’s escalating crackdown on business is moving stocks

July 26, 2021 Off By administrator

New rules published over the weekend take aim at fast-growing tutoring companies, barring them from turning a profit or raising funding on stock markets. The announcement from China’s Ministry of Education has wiped billions of dollars off the market value of several major, publicly-traded education firms.

See here: New Oriental Education & Technology (EDU) plunged nearly 50% in Hong Kong on Monday. Combined with similar losses on Friday, when reports of a crackdown on the sector first emerged, the company has lost roughly $7.7 billion dollars in market value.

Asian markets were also broadly shaken Monday. The Hang Seng index fell more than 4%, its worst day in more than a year. The Shanghai Composite slumped more than 2%.

Watch this space: It’s tempting for foreign investors to see this as a regional problem. But the fallout from Beijing’s latest moves is global.

New Oriental Education & Technology is also listed in New York, where shares fell 54% on Friday. New York-listed TAL Education crashed some 70%, losing more than $9 billion, while Gaotu dropped more than 60%, erasing $1.5 billion in value.

The chaos is part of a wider clampdown on private Chinese businesses that’s making investors nervous. The government has taken forceful action against some of the country’s best-known tech names, such as ride-hailing service Didi. Regulators announced they were investigating the company just after its high-profile US IPO last month.

The S&P/BNY Mellon China Select ADR Index, which tracks American depository receipts of top US-listed Chinese firms, is down 7.5% in the past week and 24% so far this year. (For comparison, the S&P 500 is up 17.5% year-to-date.)

And there are signs Beijing’s work isn’t done. Shares of Meituan, China’s largest food delivery service, plummeted on Monday after the government posted notices that online food platforms must treat their workers better, Bloomberg reports. The company was already under investigation for potentially violating anti-monopoly laws.

Analysts at Nomura said in a research note that the latest developments have “the potential to further dent foreign investors’ confidence in China stocks.”

“Bruised and shaken investors are now likely to ponder which other areas could potentially become the next target of expanded state control,” they wrote.

4 questions ahead of Tesla’s earnings report

Since reaching a record high in late January, Tesla (TSLA) shares have plunged nearly 30%. Can the automaker’s latest quarterly earnings, due Monday, spark a turnaround?

That depends on the answers to these questions, my CNN Business colleague Chris Isidore reports.

How are things going in China?

Unlike other automakers, Tesla typically doesn’t break out sales by country or market. But if it wants to reassure investors, it may need to give details on its sales in China, the largest market for auto sales.

Tesla has been hit by widespread reports of safety problems in China, including the recall of almost all cars made at its Shanghai…

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