Beijing tutorial crackdown slams U.S.-listed Chinese stocks

July 23 (Reuters) – Fears of an increase in Beijing regulation crushed Chinese stocks listed in the United States on Friday following a Chinese government crackdown on private educators.

U.S. stocks of TAL Education Group (TAL.N) and New Oriental Education & Technology Group Inc (9901.HK), which provide tutoring and test preparation services in China, each fell more than 50% after learning that the government was banning for-profit tutoring in basic school subjects in an effort to alleviate financial pressures on families that contributed to low birth rates. Read more

Heavy Chinese internet stocks also accentuated a recent sell-off, with China’s move adding to concerns about increased regulation of Chinese companies listed on Wall Street. Alibaba (9988.HK) and Baidu (9888.HK) both lost 4% and Didi Global (DIDI.N) fell 20%.

A massive crackdown on China’s huge internet industry has already shaken investors. Beijing launched a data-linked cybersecurity investigation into ride-sharing giant Didi Global Inc (DIDI.N) just two days after raising $ 4.4 billion in an initial public offering in New York . Didi has fallen more than 40% from its IPO price on June 30, while Baidu is down 50% from its February record and Alibaba is down 35% since October.

“A lot of the quick money guys had recently tried to catch a falling knife, and some of those actions started to look good. But today it feels like a complete surrender, where the guys can’t. not bear the pain of regulatory uncertainty. People just gave up, “said Joel Kulina, senior trader at Wedbush Securities, specializing in technology stocks.

The policy change threatens to decimate China’s $ 120 billion private tutoring industry and jeopardizes the listing ambitions of many venture-backed education companies, including Alibaba-backed Zuoyebang, and the platforms Yuanfudao and Classin Online Education, both supported by Tencent.

The KraneShares CSI China Internet ETF (KWEB.P) has fallen around 9%, leaving it down almost 30% year-to-date.

Reporting by Noel Randewich in Oakland, California Editing by Matthew Lewis

Our Standards: Thomson Reuters Trust Principles.