Chinese tech shares fall on internet industry clampdown

A sign of Tencent is seen during the third annual World Internet Conference in Wuzhen town of Jiaxing, Zhejiang province November 16, 2016. — Reuters pic
A sign of Tencent is seen during the third annual World Internet Conference in Wuzhen town of Jiaxing, Zhejiang province November 16, 2016. — Reuters pic

BEIJING, Nov 11 — Chinese tech giants including Alibaba and Tencent tumbled for a second day today, after Beijing’s market regulator put out draft antitrust rules that signalled a looming crackdown on high-flying internet giants.

Rules published on Tuesday outlined plans to prevent “monopolistic behaviour” among internet companies, a shift from a previously more hands-off approach to antitrust issues.

The timing of the announcement also raised eyebrows, coming on the eve of China’s mammoth Singles’ Day, the world’s biggest shopping festival, which is propelled by Alibaba.

Shares in the e-commerce titan dropped 9.8 per cent in Hong Kong — just a week after regulators halted an enormous IPO for the group’s financial arm — while tech rival Tencent slipped more than seven per cent.

Meanwhile, online shopping platform JD.com plunged more than nine per cent, smartphone maker Xiaomi dived more than eight per cent and food delivery firm Meituan was 9.7 per cent lower.

The losses followed massive drops for the firms yesterday.

Dave Wang, portfolio manager at Nuvest Capital told AFP the authorities’ move marks an “inflection point” for the sector.

“The dominance of the big players may have reached a point that is making authorities feel uncomfortable,” he said.

“They are looking to reduce this dominance or at least keep it in check.”

The guidelines, put out by the State Administration for Market Regulation, take specific aim at internet platforms and issues such as exclusivity clauses that hinder competition.

China’s antitrust watchdog is also targeting acts constituting an “abuse of dominant market positions” that could squeeze out smaller rivals — including unfair pricing, restricting transactions without justifiable reason, or pushing different prices and conditions on customers based on their buying habits.

The move to force business partners to “pick one of two”, therefore selling exclusively on one platform, is explicitly cited as a monopolistic practice as well.

China’s tech firms are known to have captive ecosystems. Alibaba’s Taobao platform, for example, supports payments via its own Alipay rather than Tencent’s WeChat Pay.

Beijing has moved to clip the wings of its fast-growing online platforms, most recently halting a planned record-smashing US$34 billion (RM140.4 billion) IPO of Ant Group — Alibaba’s financial arm.

But Supun Walpola, equity analyst at LightStream Research, noted that even if the new rules affect companies’ current operations, it does not “drastically” hit their core business models.

“For instance, given its scale and penetration, I see no reason why Alibaba cannot be successful even without practices like data collaboration, price descrimination or exclusivity clauses,” he said. — AFP

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