Asian stocks bounce back but Beijing’s crackdown continues

Beijing freezes over 40 IPOs linked to share sale service providers

Beijing’s Central Business District at sunset                                 
Beijing’s Central Business District at sunset – Photo: Shutterstock
                                

A slew of proposals by Beijing weighed on markets last week, with Hong Kong’s Hang Seng Index and the Shanghai Composite Index falling by 5% and 2.5%, respectively. With investor sentiment boosted by the strong performance of US markets on Friday, both indices closed Monday up by 1%. 

Most of China’s beleaguered technology stocks enjoyed a similarly healthy revival. Having recently lost its crown as Asia’s most valuable company, Tencent stock rose by almost 2% to HK$433.80 ($593.96).

At the same time, rivals such as Baidu and Meituan traded 0.8% and 1% higher. 

Alibaba slips on Hangzhou corruption rumours

Alibaba stood out as the notable exception.

The HK$3.2trn e-commerce giant fell by 3.6% on Monday after the Chinese government announced an investigation into Zhou Jiangyong, member of the Standing Committee of the Zhejiang Provincial Party Committee and secretary of the Chinese Communist Party (CCP) Hangzhou Municipal Party Committee, for serious violations of party discipline and state law. 

Alibaba is one of the largest employers in Hangzhou and has been a key driver in its evolution as one of China’s leading cities. Following the arrest, social media rumours swelled linking Zhou and his family with Ant Group’s ill-fated 2020 initial public offering (IPO). 

The financial arm of Alibaba was set for the largest market debut in human history. However, an ill-received speech by founder Jack Ma incurred the wrath of the ruling CCP. 

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Company denies online allegations

In a statement released on Sunday, the company said: “Ant Group had strictly followed laws and regulations of both markets in the previous IPO process, which is open and transparent.

“The rumours about certain people taking shares in the company are false, not to mention sudden share buying or refund.”

Beijing suspends further 42 IPOs

Hopes for any reprieve in the CCP’s effort to reassert control over the Chinese economy were further dashed at the end of the day, however, when the China Securities Regulatory Commission announced it had halted 42 IPOs as part of its growing investigation into companies that provide services associated with share sales. 

Whether the damage to market confidence will be limited to Chinese firms or spread across the region remains to be seen. 

Elsewhere in Asia, Japan’s Nikkei 225 and India’s Sensex closed at 1.78% and 0.41% higher, while Korea’s Kospi stood at 0.97% higher. 

Alibaba Group Holding Limited
Daily change
84.99
Low: 84.11
High: 88.76

Further reading: Tencent loses top spot as Asia’s most valuable company

Further reading: US crude stockpiles tumble to January 2020 lows

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