SHANGHAI, July 26 — Chinese shares slumped today as the education and property sectors were routed on worries over heavy-handed government regulations, after Beijing barred for-profit tutoring in core school subjects and restricted foreign investment in the sector.
The searing sell-off sent Hong Kong-listed Scholar Education Group shares crashing more than 40 per cent this morning. Hong Kong stocks of New Oriental Education & Technology Group Inc lost over a third of their value after US shares plummeted more 50 per cent on Friday. The company provides tutoring and test preparation services in China.
Sub-indexes tracking education and related sectors declined sharply. The CSI Education Index was last down 9 per cent and the Hang Seng Tech index slumped 4.22 per cent.
The shakeout in China’s US$120 billion (RM506.2 billion) private tutoring sector follows Beijing’s announcement on Friday of new rules barring for-profit tutoring in core school subjects to ease financial pressures on families.
At the same time, investor worries over government efforts to rein in an overheated property sector also hurt related firms, sending the CSI 300 Real Estate index down over 4 per cent. The Hang Seng Properties index fell 1.7 per cent.
China’s blue-chip CSI300 index fell more than 2 per cent to over 10-week lows, the Shanghai Composite Index declined 1.52 per cent to a two-month low and the Hang Seng index slipped as much as 2.65 per cent to its weakest level since December 29.
Media reports that China’s central bank has ordered lenders in Shanghai to raise the rate of mortgage loans for first-time homebuyers followed a statement from the housing ministry on Friday that China will strive to clean up irregularities in the property market in three years.
“We believe China’s economy, and specifically its financial system, will face significant risks in coming months due to the unprecedented tightening measures applied to the property sector,” economists at Nomura said in a note today. — Reuters