Crackdown on Chinese tech giants is 'backfiring' on Beijing, says academic

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CNBC 08 July, 2021 - 01:00am 34 views

Why is China cracking down on Didi?

China's regulatory action against Didi is an "attempt to prevent information of Chinese companies from being leaked to the outside," according to Gordon Chang, author of "The Great U.S.-China Tech War," who joined FOX Business' "Mornings with Maria," on the heels of the ride-hailing giant being banned from app stores ... Fox BusinessChina's crackdown on Didi an 'attempt' to prevent information from being leaked: Gordon Chang

Updated 5:10 PM ET, Wed July 7, 2021

CNN Business' Laura He and Paul R. La Monica contributed to this report

Read full article at CNBC

Down $831 Billion, China Tech Firm Selloff May Be Far From Over

Yahoo Tech 08 July, 2021 - 03:00am

Authorities on Tuesday issued a sweeping warning to the nation’s biggest companies, vowing to tighten oversight of data security and overseas listings just days after Didi Global Inc.’s contentious decision to go public in the U.S. That has put further selling pressure on China’s biggest technology names including Tencent Holdings Ltd., Alibaba Group Holding Ltd., JD.Com Inc., Baidu Inc. and Meituan.

“The selling will continue in the third quarter,” said Paul Pong, managing director at Pegasus Fund Managers Ltd. He says he sold two thirds of his technology stock holdings, including in Tencent and Alibaba, in May. “The measures from authorities will keep coming.”

The losses have come from 10 firms including three U.S. listed names. Didi’s ADRs fell 20% stateside on Tuesday, erasing about $15 billion of its market value.

The Hang Seng Tech Index, whose members include many of China’s biggest tech companies, fell as much as 1.9% before paring losses to 0.6% Wednesday, marking its sixth consecutive day of declines. Tencent slid 1.9%, among the biggest decliner on the Hang Seng Index. Alibaba dropped 1.7%, while Meituan fell 1.3%.

China’s sweeping warning Tuesday followed the opening of a security review by the nation’s internet regulator last week into Didi and a demand for app stores to remove it. The move stunned investors and industry executives and has hammered the Hong Kong shares of peers such as Tencent -- one of Didi’s largest backers.

Investors worry that the latest security-based probes have opened a new front in President Xi Jinping’s broader campaign against China’s internet giants that began in November with the collapse of Ant Group Co.’s mega IPO and subsequent antitrust investigations into Alibaba and Meituan. Over the weekend, China moved against two other companies that also recently listed in New York -- Full Truck Alliance Co. and Kanzhun Ltd.

Investors are likely to take “a sell first, talk later approach” to limit policy risks in their portfolio, said Justin Tang, the head of Asian research at United First Partners in Singapore. Stock prices are likely to be driven by near-term sentiment swings as opposed to company fundamentals, Jian Shi Cortesi, a Zurich-based fund manager at GAM Investment Management, wrote in an email.

To be sure, valuations may start to look attractive. Tencent, Alibaba and Baidu Inc. -- among the earliest Chinese tech companies to enter public markets and the biggest, trade at an average of 22 times forecasted earnings over the next 12 months. That compares with the 10-year average of 26 times, according to data compiled by Bloomberg.

“In case the market sentiment goes into extreme pessimism and we see the Hang Seng Tech Index down 20% from here, it could be a rare opportunity to buy some fast-growing Chinese internet companies at extremely attractive prices,” GAM’s Jian Shi said.

The Hang Seng Tech Index is down 31% from its February high. Investors in mainland China, who accounted for about a third of turnover in Tencent shares this year, turned net sellers of the stock in June.

“While the long-term future of Chinese tech remains, it will be caveat emptor for investors in the near term,” said United First’s Tang.

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What the Didi App Ban Means for Future IPOs

Bloomberg Technology 08 July, 2021 - 03:00am

Didi Gave Executives Shares Pre-IPO

Bloomberg Markets and Finance 08 July, 2021 - 03:00am

Chinese ride-hailing firm Didi sued in US as shares slide

BBC News 07 July, 2021 - 11:18pm

The two lawsuits come a week after Didi's New York Stock Exchange debut.

The company's US market value has fallen by more than 20% since a Chinese regulator told online stores to pull the app.

Beijing's cybersecurity watchdog says the app illegally collected users' personal data.

The lawsuits, which were filed in federal court in New York and Los Angeles on Tuesday, say Didi failed to disclose ongoing talks it was having with Chinese authorities about its compliance with cybersecurity laws and regulations.

The complaints named Didi's chief Executive officer Will Wei Cheng and several other executives and directors. The lead underwriters for the company's share sale - Goldman Sachs, Morgan Stanley and JPMorgan Chase - were also named as defendants.

China's Cyberspace Administration of China (CAC) announced on 2 July that it had begun to investigate Didi which had launched its US IPO days earlier.

Two days later it ordered smartphone app stores to remove the company's app from their platforms.

Didi has said it will "strive to rectify any problems", in a response on Monday.

The firm, which saw its market value fall by around $15bn (£10.9bn) on Tuesday alone, had the second-biggest ever US initial public offering (IPO) for a Chinese company, as it raised $4.4bn.

According to Bloomberg, which cited people familiar with the matter, Chinese regulators asked Didi to delay its share sale due to cybersecurity concerns as long as three months ago.

In Didi's prospectus, which was made available ahead of the IPO, the firm warned potential investors that their ability to protect their "rights through US courts may be limited, because we are incorporated under Cayman Islands law."

The document also mentioned some of the regulatory risks to its operations, but gave no indication that the CAC would start investigating the firm and ban it from accepting new users.

Founded in 2012, Didi is particularly popular in China's cities. On average, more than 20 million rides are arranged in the country through the app every day.

Didi, Goldman, Morgan Stanley and JPMorgan did not immediately respond to a request for comment from the BBC.

Also this week, Beijing said it would step up supervision of Chinese firms listed off-shore.

It set out new guidelines saying that watchdogs must improve cross-border co-operation over audits, and update rules "on data security, cross-border data flow and other confidential information management."

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The update follows regulatory crackdowns by China on a number of tech firms, from Alibaba to food delivery service Meituan.

On Monday, the CAC also said that it plans to investigate FTA. Like Didi, FTA recently made its debut on the New York Stock Exchange, raising $1.6bn (£1.1bn).

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