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Regulatory initiatives by the Chinese government are shaking up the country’s tech sector. Top companies Ali Baba (NYSE: BABA), Tencent, Xiaomi, Meituan, and JD.com saw their combined market caps drop by more than $ 280 billion in Wednesday’s trading session on the Hong Kong Stock Exchange, according to CNBC.
On Tuesday, China announced a new set of regulatory guidelines aimed at curbing large internet monopolies. Traders responded by selling the country’s major tech stocks the next day. China has had relatively close relationships with many of its tech leaders, but it appears the country is putting in place measures that may limit growth opportunities for some players in the space.
Image source: Getty Images.
The sudden change in the regulatory climate began with the surprise postponement of Ant Group’s initial public offering (IPO) earlier this month. Ant Group was due to have its IPO on November 5, but it was suspended indefinitely after senior management was called in for talks by regulators. Prior to its IPO, Ant was on track to have the largest initial public offering in history with expected funding of $ 34.5 billion on opening day.
Alibaba controls more than half of the country’s e-commerce market. He also owns an approximate 33% stake in Ant Group. Regulators can oppose the influence that Alibaba and other companies have over consumer and financial activity in the country. Ant’s Alipay mobile payment service is deeply rooted in Chinese digital life, with approximately 700 million users.
Ant’s delayed IPO and the prospect of increased government scrutiny have lowered Alibaba’s valuation, and there are growing signs of potential challenges for other big Chinese tech companies. The sector may continue to experience volatile trading in the near term as investors await more information.
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