Beijing’s tough crackdown on teaching criticizes US-listed Chinese stocks

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FILE PHOTO: An American flag appears in front of Didi Global Inc.’s logo. A Chinese man praises the ride during the IPO of the New York Stock Exchange (NYSE) in New York City, US, June 30, 2021. REUTERS/Brendan McDermid/File Photo

(Reuters) – Fears of increased regulation from Beijing crushed US-listed Chinese stocks on Friday after the Chinese government’s crackdown on private teachers.

US shares in TAL Education Group and New Oriental Education & Technology Group Inc, which provide teaching and test preparation services in China, fell more than 50% after news that the government is banning teaching for profit in core subjects to ease financial pressures on them. Families that contributed to the decline in birth rates.

Chinese internet heavyweights also deepened the recent sell-off as the move by China added to concerns about increased regulation of Chinese companies listed on Wall Street. Both Alibaba and Baidu lost 4% and Didi Global shares plunged 20%.

A large-scale crackdown on China’s massive internet sector has already alarmed investors. Beijing has launched a data-related cybersecurity investigation into transportation giant Didi Global Inc, just two days after it raised $4.4 billion in an initial public offering in New York. Didi is down more than 40% from its June 30 IPO price, while Baidu is down 50% from its February high, and Alibaba’s stock is down 35% since October.

“A lot of quick money has been trying lately with a falling knife, and some of these stocks are starting to look good. But today looks like a complete capitulation, as guys just can’t stand the pain of regulatory uncertainty,” said Joel Colina, a senior trader at Wedbush Securities who specializes in stocks. Technology, “People just gave up.”

The policy change threatens to cripple China’s $120 billion private tutoring industry and jeopardizes listing ambitions in several VC-backed education firms, including Alibaba-backed Zuoyebang, and online education platforms Yuanfudao and Classin, both backed by Tencent.

The KraneShares CSI China Internet ETF sank about 9%, leaving it down nearly 30% since the start of the year.

Reporting by Noel Randywich in Oakland, California; Editing by Matthew Lewis

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