Hong Kong stocks lead Asia sell-off as China tuition reforms bite

The broad losses across the region came as traders continued to fret over the fast spread of the Delta coronavirus variant, which has sent infections spiking and forced some governments to reimpose economically painful lockdowns or other containment measures. — Reuters pic
The broad losses across the region came as traders continued to fret over the fast spread of the Delta coronavirus variant, which has sent infections spiking and forced some governments to reimpose economically painful lockdowns or other containment measures. — Reuters pic

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HONG KONG, July 26 — Markets in Asia mostly fell this morning, led by Hong Kong after Beijing at the weekend further cracked down on China’s tech firms, while education companies were hammered as the government unveiled sweeping reforms of the sector.

The broad losses across the region came as traders continued to fret over the fast spread of the Delta coronavirus variant, which has sent infections spiking and forced some governments to reimpose economically painful lockdowns or other containment measures.

The selling extended from Friday, despite a strong lead from Wall Street, where all three main indexes ended at record highs with the Dow ending above 35,000 for the first time.

Investors have a packed agenda of possible market-moving events this week including the Federal Reserve’s latest policy meeting, US economic growth data, and earnings from some of the world’s biggest firms such as Apple and Amazon.

They will also be keeping tabs on a meeting between US Deputy Secretary of State Wendy Sherman and Chinese Foreign Minister Wang Yi later in the day, the highest-level visit by the Biden administration.

The talks come at a time of increasingly strained relations between the superpowers, which have cracked heads over a range of issues including technology, Hong Kong and human rights.

Hong Kong sank more than three per cent with education companies battered after China on Saturday unveiled reforms that will massively change the way they do business.

Beijing said the sector had been “hijacked by capital”, adding that it would prevent firms that teach school curriculums from making a profit, raising capital or going public.

China’s private education sector was worth US$260 billion (RM1.1 trillion) in 2018 according to consultancy and research firm L.E.K. Consulting, driven by a hyper-competitive kindergarten-to-university education system in oversubscribed cities.

JP Morgan Chase analysts said it was uncertain whether firms could continue to be traded on stock markets under the new regime, adding that “in our view, this makes these stocks virtually un-investable”.

Bitcoin in recovery

New Oriental Education & Technology Group crashed 38 per cent in Hong Kong, having dived a similar amount Friday as speculation about the move circulated on social media. Its New York-listed shares collapsed 54 per cent.

Koolearn Technology dived more than 30 per cent and China Maple Leaf Educational Systems shed more than 10 per cent.

Tech firms also took a hit in response to Beijing’s latest moves against the sector as it told Tencent to relinquish its exclusive music label rights, saying the firm had violated antitrust laws.

Tencent bought a majority stake in rival China Music Group in 2016, effectively controlling more than 80 per cent of exclusively held music streaming rights domestically, the State Administration for Market Regulation said in a statement.

Tencent fell more than seven per cent and Alibaba was off five per cent.

In other markets, Shanghai dropped more than two per cent, as did Manila, while there were also losses in Singapore, Seoul, Mumbai, Wellington and Taipei. But Tokyo rose one per cent as traders returned from a four-day weekend break, while Jakarta also edged up. Sydney was flat.

London, Paris and Frankfurt all fell after the opening bell.

Still, observers remain upbeat about the outlook for the world economy and equity markets, helped by a strong earnings season so far.

“The macro narrative remains one of a post-pandemic recovery,” said Chris Iggo at AXA Investment Managers, though he added that “continued pandemic risk is likely to be a recurring source of ‘risk-off’ events in the financial markets”.

Bitcoin pushed to within touch of the US$40,000 mark in Asian trade as investors were cheered by more supportive comments from Tesla tycoon Elon Musk.

The highly volatile digital unit has rocketed around 30 per cent since falling below US$30,000 last week.

It hit an intra-day high of US$39,681 Monday before easing slightly. However, it is still well off the record near US$65,000 seen in April. — AFP

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