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China’s largest tech stocks fell after the country passed a strict data privacy law, sparking renewed investor concerns about the intensity of Beijing’s regulatory crackdown.
In Hong Kong, the Hang Seng Tech index of China’s largest internet and e-commerce stocks, including Tencent and Alibaba, fell 2.5 percent on Friday after state news agency Xinhua announced the law had been passed and would take effect Nov. 1.
The report gave few details about the content of the law, but said it would clarify how sensitive personal data might be processed, require internet platforms to set up “robust compliance systems for protecting personal information” and emphasized that companies “do not collect personal information”. An earlier draft law severely limited the ability of Chinese companies to collect data without users’ consent and imposed fees of up to Rmb 50 million ($7.7 million) or 5 percent of annual sales for serious violations.
Hong Kong-traded shares of Alibaba fell more than 3 percent on Friday after a grueling session in New York last night.
The Nasdaq Golden Dragon index of major US-listed Chinese stocks closed more than 5 percent lower in New York on Thursday, swept by a nearly 7 percent drop for the e-commerce group founded by Jack Ma. The meter is down nearly 10 percent since Monday, putting it on track for its biggest weekly drop since April.
The sell-off for Chinese technology stocks, triggered by Beijing’s regulations against industries including gaming and fintech, has sent the index down nearly 53 percent from its February high. Tens of billions of dollars have been wiped from the wealth of tycoons, including the Alibaba founder and Tencent’s Pony Ma.
The use of data by Chinese companies has come to the fore since Beijing’s cybersecurity bureau launched an investigation into ride-hailing group Didi Chuxing, days after it raised more than $4 billion in a New York IPO in June.
Other Chinese media reports on Friday indicated that Beijing would expand its regulatory campaign into new territories. In Hong Kong, health stocks plummeted after the Chinese Communist Party called on the People’s Daily to increase regulation of prescriptions filled through online platforms. The safety of prescription drug sales online had “become a topic of social concern,” it said.
Ping An Healthcare fell 14.5 percent, while Alibaba Health Information Technology fell more than 13 percent.
In China’s markets, beverage makers sold off after local news channel Caijing reported that a director of an unnamed spirits producer would attend a regulatory meeting on oversight of the industry. China has also been trying to tackle a culture of heavy drinking after work in recent weeks.
Kweichow Moutai, the world’s largest beverage company, ended the day 4.4 percent lower, while rival Luzhou Laojiao lost 7.7 percent. The CSI 300 index of major listed stocks in Shanghai and Shenzhen fell nearly 2 percent.
Morgan Stanley analysts warned that recent declines for Chinese tech groups could be exacerbated by investors withdrawing from equity funds focused on the country’s equities, “causing additional difficulties in regaining substantial inflows in the near term”.
China’s commodities markets stabilized after concerns about a slowdown in the country’s growth led to a more than 7 percent drop in iron ore futures on Thursday. Iron ore contracts traded in Dalian rose 0.3 percent on Friday.
“It is clear that we see a further slowdown in the Chinese economy,” said Mansoor Mohi-uddin, chief economist at Bank of Singapore. He added that in addition to outbreaks of the Covid-19 Delta variant in China, this week’s economic readings, such as retail and industrial production, were weaker than expected, while credit growth was “surprisingly slow”.
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