July 28, 2021 at 07:45 pm
Beijing, China—Chinese state media sought to reassure markets Wednesday after a rout fueled by Beijing’s latest regulatory crackdowns, saying markets were likely to stabilize and that the new rules would prove beneficial to the economy in the long term.
Investors have been sent scurrying this week after Beijing unveiled a series of new rules for the private education and food delivery sectors, which Bloomberg said had wiped nearly $1.5 trillion off the value of companies in Hong Kong and mainland China since Thursday.
The Hang Seng Index in Hong Kong gave up almost 10 percent over three trading days to Tuesday’s close, while the Shanghai Composite Index shed more than five percent.
But Chinese media came out Wednesday to temper the panic, which is showing signs of seeping into global markets.
The recent sharp drops were “unsustainable” and indexes were expected to gradually stabilize, the Securities Daily said in a front page article citing a securities company.
“Short-term policies and high valuations have caused panic-selling,” it added, but the inflow of long-term capital remained the direction of travel for Chinese shares.
The hefty selling in private tutorial firms came after officials announced new rules over the weekend compelling them to register as non-profit organizations and banning them from raising capital or going public.
That effectively smashed the business models of multibillion-dollar enterprises, with analysts calling them essentially uninvestable.
Beijing also turned its attention to the food delivery sector, ordering companies to ensure workers are paid a minimum wage and relax delivery time limits.
Meanwhile, Tencent was told it had violated antitrust laws and was compelled to relinquish its exclusive music label rights, the latest in a long-running campaign to rein in the country’s tech titans who are considered to have grown too powerful.
But the Securities Times, also using a front-page article, said the losses “to an extent, reflected the misreading of policies and venting of sentiment by some funds.”
It added: “While adjustment of policies in some industries may affect their current business model, it will be beneficial toward unleashing more social vitality in the mid-to-long term and aid consumption in most other areas.”
Meanwhile, the China Securities Journal said there was no need for pessimism while the Shanghai Securities News cited analysts as saying the falls provided decent buying opportunities.
However, the remarks do not appear to have had the desired effect. Private-learning firms clawed back some of their losses but tech firms continued to struggle, and the Shenzhen and Shanghai markets fell further, while Hong Kong reversed an early rally to sink back into negative territory in the afternoon.