When authorities in Beijing blindsided markets by cracking down on Didi just days after the ride-hailing giant pulled off a multi-billion-dollar IPO in the US, they must have known the collateral damage would be substantial.
Subsequent nods to regulatory scrutiny and stricter rules for overseas listings, as well as thinly-veiled threats to punish companies for failings related to data security, only added to the palpable sense of angst.
The bottom line: If there were questions as to whether the Party was satisfied that China’s home-grown tech companies were sufficiently humbled by the regulatory blitz which began in November, when Beijing iced Ant’s IPO at the last minute, those queries were answered this week. And the answer is a resounding “no.”
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The situation went from bad to worse in Hong Kong Thursday, and irrespective of how things proceed from here, the damage (both real and psychological) is done.
The beleaguered Hang Seng Tech Index fell almost 4% in a seventh consecutive session of losses. It was on track for a 7% weekly decline (figure below).
Forgive the lapse into colloquialisms, but that is a God-awful slump when considered in conjunction with how far the gauge already was from its peak in February.
The irony here is glaring. Beijing quite obviously wants to discourage US listings, which should be a boon for Hong Kong. And yet, in the process, the Party is knee-capping the Hang Seng.
The city benchmark erased its gains for 2021 on Thursday (figure below).
H-shares are on the brink of a bear market.
As noted in “China’s ‘Dovish Pivot’: What’s The Message?,” the State Council’s hint at an imminent RRR cut from the PBoC appears to have sent the “wrong” message about the state of the Mainland economy. Usually, nods to PBoC easing are bullish. This time, though, the abruptness of the dovish pivot raised eyebrows.
Whatever the case, officials in Beijing may want to consider whether enough is enough on the implicit and explicit regulatory threats — at least for now.
There’s no ambiguity. Everyone gets the message. And if they didn’t, “rumors” that The China Securities Regulatory Commission will soon close a key loophole that allowed Chinese companies incorporated outside of China to list overseas without chancing a veto from Beijing, should do the trick.
If the idea is to “boost Hong Kong’s financial center status,” (as one analyst from Jefferies put it), engineering bear markets probably isn’t the best way to go about things.
When autocratic rulers drink their own propaganda kool aid they start believing they are the brightest bulb in the pack. And then it all collapses. Happened to Hitler. Xi screwed up with Hong Kong and now he’s making the hole deeper. Good leaders carry the water, they let those who know operate the well.
The real global conflict can be measured by its leaders. Merkel has been the anchor for the democratic side for decades. We desperately need someone(s) to fill her shoes.
Xi knows that the billionaires are rich enough, he couldn’t care if they got 10% less rich
His goal is to improve the quality of the market and snub out amoral unbridled capitalism
Even with moderate success, the direction is virtuous for the society. It is a big buy signal.
Instead of hollowing out, this is an act of building depth and quality
There’s plenty of “depth” in Hong Kong. There’s no lack of market “quality” in the city. A-shares are another story, of course, but all he’s doing by pushing city shares into the abyss is further undermining already fragile international sentiment
Xi had a great opportunity to use Hong Kong to build a bridge to the West. He ended up distancing China. He thought it was going to work against Trump’s bombast. He made a misstep.