China Rout Worsens as Crackdown Stocks Slump for Third Day

Chinese shares in the crosshairs of Beijing’s regulatory crackdown extended their sharp selloff into a third day Tuesday. Technology and education shares retreated once again while property stocks also fell. Tencent Holdings Ltd. slumped 10%, after the company’s music arm gave up exclusive streaming rights and was hit with fines. Meituan fell as much as 16%, its biggest decline ever, as investors digested new rules on online food platforms.

The Hang Seng Tech Index, a gauge of many Hong Kong-listed Chinese stocks, dropped over 9% and has now fallen into negative territory exactly one year after it was first launched. China’s CSI 300 Index fell close to 4% and the yuan slid to its lowest since April against the dollar.

Investors in some of China’s most vibrant sectors — from technology to education — have found themselves in the firing line as Beijing attempts to rein in private enterprises it blames for exacerbating inequality, increasing financial risk and challenging the government’s authority. A seeming acceptance of short-term pain for stockholders in pursuit of China’s longer-term socialist goals is a rude awakening for those more used to government support for financial markets.

Stocks tumbled in “panic selling” on Monday after regulators on Saturday published reforms that will fundamentally alter the business model of private firms teaching the school curriculum. Hong Kong’s major retail brokers lowered margin financing for battered Chinese education stocks as investors suffered steep losses.

Meanwhile, sentiment toward property stocks was hit as China Evergrande Group surprisingly decided against declaring a special dividend after investors were spooked by news that banks and ratings companies are growing wary of the debt-laden developer. Its shares fell as much as 16%. A Bloomberg Intelligence index of Chinese property developers slid over 4% on Tuesday after slumping almost 5% on Monday as investors feared regulations on the sector will tighten further.

China Rout Worsens as Crackdown Stocks Slump for Third Day, CNBC, Jul 27