U.S.-Listed Chinese Stocks Have Lost Another $150 Billion In Market Value This Week As Beijing Targets ‘Excessive’ Wealth

Topline

Shares of Chinese tech giants trading in the United States struggled to pare losses Friday amid intensifying concerns over China’s efforts to impose sweeping new regulations on its publicly traded companies over the next several years, yielding market value losses of more than $150 billion for the 10 largest U.S.-listed Chinese stocks this week alone.

Key Facts

As of 2:45 p.m. EDT, shares of e-commerce juggernaut Alibaba, the largest Chinese company listed in the U.S., were among the hardest hit, down more than 15% on the New York Stock Exchange over the past week to $157, deflating its market capitalization to $424 billion.

Fellow online retailers JD.com and Pinduoduo, posted similarly staggering losses, wiping out about $20 billion and $10 billion in market value this week, respectively, despite ticking up about 2% Friday.

“China remains a huge source of global concern,” market analyst Adam Crisafulli of Vital Knowledge Media wrote in a Friday email, pointing to the nation’s strengthening regulatory campaign against corporations and actions that last month included demanding online education companies end their for-profit business models.

This week, shares of Chinese stocks have crashed steadily since Tuesday, when President Xi Jinping vowed to redistribute wealth in the nation by regulating “excessively high incomes”—spurring a sell-off that crushed shares of European luxury companies that do big business in China, like LVMH and Gucci-parent Kering.

U.S.-listed shares of online-gaming company NetEase, electric carmaker NIO and Internet firm Baidu plunged 11%, 10% and 10%, respectively, this week.

All told, the 10 largest Chinese companies trading in the United States have lost about $153 billion in market value since last week—more than 15% of their combined market value of roughly $940 billion.

Key Background

In a matter of weeks, China has introduced harsh regulations targeting wide swaths of its economy and showing investors how risky investing in its market can be, Tom Essaye, author of the Sevens Report, wrote in a recent note. “Yes, there’s a huge market and lots of growth potential, but obviously there are regulatory risks that seem to be growing larger with every passing month,” said Essaye. Last week, officials released a sweeping five-year blueprint for the crackdown, covering virtually every sector in its market. Then on Wednesday, China’s market regulators published a long list of draft rules targeting tech companies, barring them from using data to influence consumer choices and “traffic hijacking activities,” among other things.

Crucial Quote

“This is all a stark reminder that the current regulatory crackdown from Beijing is not going to let up,” Wedbush analyst Dan Ives said in a Thursday note, forecasting U.S. tech stocks, which are outperforming the broader market Friday, should benefit from the tech-focused crackdown in China over the next year. “The fear with more regulation in China around the corner is a major worry that is hard for investors to digest, and it will ultimately cause more of a rotation from the China tech sector to U.S. tech.”

Surprising Fact

The Nasdaq Golden Dragon China index, which tracks Chinese businesses trading in the United States, is down 9% this week and has crashed 51% from a February all-time high.

Further Reading

U.S., European Investment Banks May Have Lost Some $12 Billion As Chinese Education Firms Crashed (Forbes)

China’s Internet Tycoons Suffer $13.6 Billion Wealth Drop As Regulatory Crackdown Triggers Market Sell-Off (Forbes)

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