The right time to start: Chinese tech companies in the focus of the authorities – why it might still be worthwhile to join now | message
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• Chinese authority monitors tech companies
• Uncertain future ahead
• Still cheaper entry possible
Tencent, ByteDance & Co .: Chinese tech companies under pressure
Chinese fintech companies are currently in the focus of the authorities of the People’s Republic. According to a report by the US broadcaster “CNBC”, the Chinese financial regulator summoned 13 fintechs at the end of April to encourage them to comply with the regulations more strictly. Industry giants such as Tencent and TikTok parent ByteDance can also be found among the companies observed. The authorities of the Middle Kingdom want to take action against the “platform economy” of the Internet industry. President Xi Jinping should also support these steps and order antitrust investigations.
The industry can look back on rapid growth. “Internet platforms have played an important role in improving the efficiency of financial services and expanding access to financial services for more people,” CNBC quoted the People’s Bank of China as saying. “At the same time, some financial services have been operated without a license and there are serious rule violations in areas such as regulatory arbitrage, unfair competition and harm to consumer interests.”
Authorities also fell victim to the IPO of the Alibaba subsidiary Ant Group
The Chinese Amazon competitor Alibaba is also repeatedly caught in the crossfire of the authorities. Not only had the government imposed billions in fines on the internet giant for monopoly business activities, the IPO of the financial subsidiary Ant Group was also surprisingly canceled in November 2020. The Shanghai Stock Exchange stated that the “regulatory environment” has changed in the meantime. Shortly afterwards it became public that the Chinese supervisory authority was investigating the payment service and Alibaba founder Jack Ma. The background was, among other things, a new restriction on online lending in the country, under which the company’s business operations suffered, which is why Ma publicly criticized them. Another attempt for the trading debut advertised as a record IPO seems unlikely at the moment.
Reports of “irregularities” in business operations
“The stricter supervision is not just aimed at the Ant Group, and the Ant Group’s problems are definitely no exception,” said a Chinese state news portal, according to CNBC. “Many platform companies have irregularities of varying degrees behind their rapid expansion over the years.” In addition to Tencent and ByteDance, Du Xiaoman Financial, Meituan, Lufax, 360 DigiTech, Trip.com, Xiaomi and JD.com’s JD Digits are also the subject of the investigation. Accordingly, the subpoenaed companies should draft so-called “business adjustment plans”, separate “improper connections” between payment platforms and other financial products and give up monopolies when storing data. The supervisory authority also called on Chinese companies to act more compliantly when it comes to foreign stock exchange listings.
Goldman Sachs Analyst: Buy whenever there is seasonal weakness
As a result of the regulations, the prices of many Chinese tech companies also fell back this year. However, analysts at the major US bank Goldman Sachs see no reason to exit the stressed stocks – on the contrary. Investors could now benefit from low entry prices. “May is historically a difficult month for Chinese stocks, but we would buy with any seasonal weakness,” CNBC quoted analysts as saying in a customer note. On the one hand, the strategists recommend cyclical values from the People’s Republic, whose prices tend to change depending on economic development. But growth stocks, which could develop better than the broader market, can now also be worthwhile, according to the experts.
JPMorgan strategist: Good buying situation despite uncertain future
Howard Wang, chief analyst for the Chinese region at JPMorgan, also admits that the regulatory unrest means an uncertain future for the values concerned. In the long term, however, nothing stands in the way of the success of the shares, as the expert explains in the “CNBC” program “Street Signs Asia”. “If we look at these fundamentals and stretch them out over time, I think we are actually in a pretty good buying position,” said Wang. Although the expert does not recommend buying specific stocks, he recommends large technology companies because of their low valuation and their potential for profit growth. In addition, the Chinese supervisory authorities have so far remained rational in their approach, the strategist reassures market participants. “From our perspective as investors, it’s really just a matter of hiding, looking at the fundamentals and making sure that companies are not doing anything that could be construed as unfair market practice – at least for now,” Wang said. “I think if we put that in context … it actually looks like a decent environment to invest in these stocks. It’s going to be tough in the next few weeks, but overall, these are the types of investments you can get into China wants to do. ”
The asset manager DNB Asset Management appears to be less optimistic about China stocks. The investment subsidiary of the Norwegian bank DNB ASA not only sold some shares in the Internet giant Alibaba in the first quarter of the current year, but also got rid of all shares in Tesla’s Chinese competitor Xpeng.
Finanzen.net editorial team
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