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The Chinese government’s regulatory initiatives are shaking the country’s tech sector. The best companies Alibaba (NYSE: BABA), Tencent, Xiaomi, Meituan, is JD.com saw their combined market capitalizations 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 reacted by selling the country’s big tech stocks the next day. China has had relatively close relationships with many of its technology leaders, but it appears the country is putting in place measures that could limit growth opportunities for some players in 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 supposed to have its IPO on November 5, but was suspended indefinitely after senior management was summoned for interviews by regulators. Prior to its delayed IPO, Ant was well on its way to having the largest initial public offering in history with an expected funding of $ 34.5 billion on opening day.
Alibaba controls more than half of the country’s e-commerce market. It also holds an approximately 33% stake in Ant Group. Regulators can oppose the influence that Alibaba and other companies give to financial and consumer business in the country. Ant’s Alipay mobile payment service is deeply rooted in China’s digital life, with around 700 million users.
Ant’s delayed IPO and the prospect of greater government scrutiny have reduced Alibaba’s valuation, and there are growing signs of potential challenges for other large Chinese tech companies. The sector may continue to see volatile trading in the near term as investors await further information.
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