Plunging Hong Kong Drags Asia Down as China Crackdown Continues

• JPMorgan Chase says some education stocks now ‘uninvestable’

• Traders eyeing Apple and Amazon earnings figures due out this week

Markets across Asia suffered on Monday, led by Hong Kong, after Beijing cracked down again on China’s tech firms and also turned its attention to its education companies.

The broad losses across the region came as traders continued to fret over the fast spread of the Delta coronavirus variant, which has sent infections spiking and forced some governments to reimpose economically painful lockdowns or other containment measures.

The selling extended from Friday, despite a strong lead from Wall Street, where all three main indexes ended at record highs with the Dow ending above 35,000 for the first time.

Read more: China’s New Private Tutoring Rules Put Billions of Dollars at Risk

Investors have a packed agenda of possible market-moving events this week including the Federal Reserve’s latest policy meeting, US economic growth data and earnings from some of the world’s biggest firms such as Apple and Amazon.

They will also be keeping tabs on a meeting between US Deputy Secretary of State Wendy Sherman and Chinese Foreign Minister Wang Yi, the highest-level visit by the Biden administration.

The talks come at a time of increasingly strained relations between the superpowers, who have cracked heads over a range of issues including technology, Hong Kong and human rights.

Hong Kong sank more than 4% with education companies battered after China on Saturday unveiled reforms that will massively change the way they do business.

‘UNINVESTABLE STOCKS’

Beijing said the sector had been “hijacked by capital”, adding that it would prevent firms that teach school curriculums from making a profit, raising capital or going public.

JP Morgan Chase analysts said it was uncertain whether firms could continue to be traded on stock markets under the new regime, adding that “in our view, this makes these stocks virtually uninvestable”.

The Hang Seng Index tumbled 4.13%, or 1,129.66 points, to 26,192.32. The benchmark Shanghai Composite Index sank 2.34%, or 82.96 points, to 3,467.44, while the Shenzhen Composite Index on China’s second exchange plunged 2.28%, or 56.33 points, to 2,411.81.

Tech firms also took a hit in response to Beijing’s latest moves against the sector after it told Tencent to relinquish its exclusive music label rights, saying the firm had violated antitrust laws.

TENCENT TARGETED

Tencent bought a majority stake in rival China Music Group in 2016, effectively controlling more than 80% of exclusively held music streaming rights domestically, the State Administration for Market Regulation said in a statement.

Tencent fell 7.7% and Alibaba was off more than 6%. The news soured the mood elsewhere as Shanghai dropped more than 2%, as did Manila, while there were also losses in Singapore, Seoul, Mumbai, Wellington and Taipei.

But Tokyo rose as traders returned from a four-day weekend break, while Jakarta also edged up. Sydney was flat.

BITCOIN BOOST

The benchmark Nikkei 225 index rose 1.04%, or 285.29 points, to 27,833.29. The broader Topix index gained 1.11%, or 21.21 points, to 1,925.62.

Bitcoin pushed to within touch of the $40,000 mark in Asian trade as investors were cheered by more supportive comments from Tesla tycoon Elon Musk.

The highly volatile digital unit has rocketed around 30% since falling below $30,000 last week. It hit an intra-day high of $39,681 on Monday before easing slightly. However, it is still well off the record near $65,000 seen in April.

MARKETS

Tokyo – Nikkei 225: UP 1.0% at 27,833.92 (close)

Hong Kong – Hang Seng Index: DOWN 4.1% at 26,192.32 (close)

Shanghai – Composite: DOWN 2.3% at 3,467.44 (close)

New York – Dow: UP 0.7% at 35,061.55 (close)