SHANGHAI: From Alibaba to Tencent, China’s largest companies are once again at the centre of a market storm, spurred by speculation that Beijing is readying another assault on the world’s biggest Internet arena.
Three of China’s most valuable businesses – Alibaba Group Holding Ltd, Tencent Holdings Ltd and Meituan – have shed more than US$100bil (RM418.54bil) in the span of three turbulent days.
It’s a remarkable reversal from just a week ago, as investors like Charlie Munger spotted bargains among China Tech Inc after a US$1.5 trillion (RM6.52 trilion) selloff in 2021. Macquarie issued a report this month headlined “peak crackdown.”
Now, investors are frantically attempting to parse a series of events that suggest Beijing is once more preparing to rein in its giant private sector.
When Alibaba reports earnings today, its executives will again face questions about Beijing’s intentions for a sector subjected last year to unprecedented regulatory curbs and punishments, after Xi Jinping’s administration launched a “common prosperity” campaign to curb tech-sector excesses and force them to share the wealth.
The bloodletting began Friday, when the top state economic planner demanded Meituan and its peers lower the fees they charge restaurants in pandemic-hit regions.
On Monday, a pair of unverified online posts that went viral suggested Tencent – which weathered 2021’s onslaught better than most – was facing a major regulatory crackdown, forcing its public relations chief into an unusually aggressive denial.
Later that day, Bloomberg reported that Beijing had ordered state-run firms to report their exposure to Jack Ma’s Ant Group Co – the hardest-hit firm in a year-long government campaign against “disorderly capital.”
“The events of the past 48 hours are a wake-up call that regulation isn’t finished,” said Michael Norris, an analyst with Shanghai-based consultancy AgencyChina.
“We are going to be in a situation where the regulation and the slowdown in China’s economy happen side by side. It’s going to be challenging for businesses that rely on consumers and merchant advertising to be able to make this year’s numbers.”
Shares in Alibaba and Tencent were up less than 1% in early Hong Kong trading yesterday.
While many investors were counting on an end to the relentless regulatory pressure, fundamental questions remained about the ability of China’s tech giants to resume the growth they had enjoyed during a decade of near-unfettered expansion.
Alibaba and Tencent had already been expected to record their slowest pace of quarterly revenue rises since listing.
The shell-shocked industry had been expected to tread more cautiously this year than ever before – curtailing the hiring and acquisition sprees of years past, for one.
Didi Global Inc is preparing to reduce headcount by as much as 20% ahead of its Hong Kong IPO, Bloomberg News reported last week.
Twitter-like Weibo Inc has started to readjust its businesses since the start of the year, allocating some staff to new roles before letting them go, the company said in a statement last week, in response to online posts alleging the firm is firing a wave of people.
“The golden period of Chinese Internet is probably already behind us,” said Jessica Tea of BNP Paribas Asset Management.
“That said, we believe the peak of the regulatory intensity is probably behind us in this cycle, as we move from policy normalisation to growth normalisation.” — Bloomberg