Wild week in China roils tech stocks, debt markets, HK

Bloomberg

Chinese authorities moved on a number of fronts to rein in potential risks to the Communist Party’s rule, touching everything from tech firms to bond markets to political dissent in Hong Kong.
The actions rattled markets as investors sought to grasp the rationale for the changes emanating from Beijing’s opaque corridors of power. They came shortly after the shock suspension of Ant Group Co’s record-breaking $35 billion initial public offering. China’s State Administration for Market Regulation (SAMR) is a sleepy government bureaucracy essentially unknown outside the country. But last week, SAMR dropped 22 pages of dense regulatory proposals that wiped out $290 billion in market value and signaled the most sweeping overhaul of the country’s technology industry since the founding of
the People’s Republic six decades ago.
The regulators took aim at the duopoly of Alibaba Group Holding and Tencent Holdings, which are among the most valuable companies in the world. The new rules may block them from acquiring promising startups and force them to sell stakes in other companies.
Meanwhile, China’s top banking watchdog doubled down on its push to rein in financial technology companies such as Ant, saying they should be subject to the same supervision and risk management as banks. Analysts estimate that new rules could reduce the fintech giant’s value by as much as $140 billion. State-backed lenders such as China Merchants Bank Co — known domestically as the retail bank king — are emerging as the biggest winners.
The onshore default of a state-owned coal miner from central Henan province took markets by surprise earlier this week, sparking fresh concerns over the level of implicit support state-linked firms can expect as Beijing moves towards introducing a market-led approach to risk.
Uncertainty over rising credit stress rippled through the market, prompting a selloff in the bonds of other state-owned enterprises and local government financing vehicles that spilled over into financial stocks.
At least six Chinese banks cut their holdings of corporate bonds, and coal companies also rushed to cancel debt sales or delay pricing their notes as investors soured on the sector.
All that’s been exacerbated by fears of a potential credit crunch at a high-profile firm with ambiguous ties to the state.