Hong Kong stocks plunge more than 5% in afternoon

HONG KONG: Hong Kong shares plunged more than 5 per cent Tuesday (Jul 27), extending the previous day's hefty losses on worries about a regulatory crackdown by China on a range of industries including private education and technology.

The Hang Seng Index tumbled 5.32 per cent, or 1,394.25 points, to 24,798.07 - having lost more than 4 per cent Monday, while it has now given up more than 8 per cent in three trading days.

READ: China's private education firms brace for hit from new rules, shares tumble

Mainland markets fared only a little better. The benchmark Shanghai Composite Index sank 2.49 per cent, or 86.26 points, to 3,381.18, while the Shenzhen Composite Index on China's second exchange shed 3.33 per cent, or 80.38 points, to 2,331.43.

Investors in Hong Kong have been sent scurrying for cover after Beijing at the weekend announced a series of measures that will tighten its grip on the world's number two economy.

Private tutorial firms were strafed on Monday after officials said they would stop approving new after-school education institutions, while all existing ones must now register as non-profits, saying the industry has been "hijacked by capital".

The private education sector was worth US$260 billion in 2018 according to consultancy and research firm LEK Consulting, driven by China's hyper-competitive kindergarten-to-university education system in oversubscribed cities.

READ: China forces tutoring companies to go non-profit

But analysts said the new plans would make the firms already listed - some of them in New York - uninvestable.

Shares in New Oriental Education & Technology Group lost more than 5 per cent after plunging 47 per cent Monday, while Koolearn Technology Holding dropped 2 per cent and China Maple Leaf Educational Systems fell 7.6 per cent.

On Monday, Koolearn fell 33 per cent and Maple Leaf lost 10 per cent.

The crackdown on the private education sector resembles authorities' moves to rein in China's tech giants, taking aim at monopolistic behaviour and imposing huge fines against firms.

READ: China jitters drag Asian stocks to seven-month low

On Saturday, the market regulator said Tencent had violated antitrust laws, compelling it to relinquish its exclusive music label rights.

Technology firms, which have for months been in the crosshairs of Beijing as it looks to rein in their outsized power among China's consumers, were also among those being hammered.

Tencent shed 10 per cent and Alibaba dived more than 8 per cent. Tencent lost more than 7 per cent Monday and Alibaba shed more than five.

Meanwhile food delivery giant Meituan collapsed more than 16 per cent, having been knocked for 14 per cent Monday, after new rules were issued by China's market regulator to ensure workers' incomes are above minimum salary levels.

Companies must also "appropriately relax delivery time limits" in a notoriously frenetic delivery sector that is an artery of life in China's cities.

Shares in Hong Kong Exchanges and Clearing, which operates the city's market, plunged more than 7 per cent.

CMB International Securities strategist Daniel So added: "The key concern now is whether regulators will do more and expand the crackdown to other sectors.

"The regulatory concerns will be the key overhang to the market for the second half."