Market Close Nov 11

China tech slides as regulatory gaze intensifies

China’s technology sector pressured by increased regulatory concerns; US Treasuries weaken as US economy gathers pace; Japan equities rally fuelled by stimulus, BoJ moves

China tech slides as regulatory gaze intensifies
Benchmark Brent oil rose to a more than two-month high above $45 a barrel on Wednesday on hopes of an effective Covid-19 vaccine and an industry report showing US crude inventories fell more than expected. Photo: Reuters/ Angus Mordant.

(ATF) Hong Kong: Asian markets were broadly higher on confidence that a vaccine against the coronavirus epidemic is just around the corner but Chinese markets underperformed, weighed down by the technology sector as Beijing moved to tighten regulations for internet and fintech firms.

China’s markets were also weighed down by underperforming vaccine makers after Brazil’s health regulator suspended a Covid vaccine trial by Chinese firm Sinovac. 

Japan’s Nikkei 225 index jumped 1.78% outperforming the region and hitting a 29-year high after a senior lawmaker in the ruling Liberal Democratic Party (LDP) said Japan's third extra budget for economic stimulus steps may need to be bigger than 15 trillion yen ($142.5 billion). Regional banks gained after the Bank of Japan announced a scheme encouraging regional lenders to consolidate.

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This follows news that the government would compile a package of stimulus measures to revitalise an economy hit hard by the coronavirus pandemic.

Australia’s S&P ASX 200 advanced 1.72% but Hong Kong’s Hang Seng index eased 0.28% and China’s CSI300 declined 0.99%. Regionally, the MSCI Asia Pacific index added 1.54%.

In China technology shares tumbled as regulators sought to rein in influential Internet companies.  

“The aim is to curb monopolistic practices, such as loss-leading, exclusivity in transactions, preferential treatment for certain users/clients, bundled selling, and other practices that Alibaba’s Tmall, Taobao, Ele.me, and Meituan have all been accused of doing,” Everbright SHK Research analysts in a note.

The analysts said financial regulators appeared to clamping down on large technology firms' lending arms, amid concerns that large technology firms are deploying regulatory arbitrage to lever up their loan book and take market share from the more closely regulated banks.

“We could see a two-track regulatory environment for large technology firms, as their monopolistic practices as e-commerce platforms are scrutinised by the SAMR but the more invasive CBIRC takes action on their financial arms,” the note said.

US Treasuries continued their slide with the 10-year yield up 2 basis points at 0.98%. Yields have risen 25 basis points in the past week and the sell-off has gathered pace after the US elections.

“While a Biden victory combined with the Republicans likely keeping control of the US Senate was the least bond-bearish outcome – thus avoiding the big surge in government spending likely after a Democratic “blue wave” – there is clear upward momentum in US economic growth that suggests more upside for Treasury yields on both an absolute basis and relative to other countries,” BCA Research economists said in a note. 

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Asia Stocks

· Japan’s Nikkei 225 index jumped 1.78%

· Australia’s S&P ASX 200 advanced 1.72% 

· Hong Kong’s Hang Seng index eased 0.28%

· China’s CSI300 eased 0.99%

· The MSCI Asia Pacific index added 1.54%.

Stock of the day

China’s technology bellwethers tumbled as regulators drafted anti-trust guidelines for major internet platforms. Tencent, Alibaba and Meituan were the most heavily traded stocks on the exchange falling by 8-10% each.

Asian markets China tech stocks Alibaba Tencent Meituan anti-trust regulations crackdown China regulators