China's Domestic 'Big Tech Crackdown'... Domestic Investors Buy at Low Prices

[Image source=AP Yonhap News]

[Asia Economy Reporter Ji Yeon-jin] As the Chinese government intensifies regulations on its domestic big tech companies, related stocks are falling, but domestic investors appear to be taking the opportunity to buy at low prices.

According to the Korea Securities Depository on the 25th, as of the 23rd, the total amount of major Chinese big tech stocks held by domestic investors, including Tencent (騰迅·Tengxun) and Alibaba, was $993.27 million (approximately 1.1437 trillion KRW). The Depository only aggregates holdings for the top 50 stocks held by domestic investors in major global stock markets, so the actual scale of stock holdings is expected to be larger.

These stocks belong to companies that the Chinese authorities have recently subjected to various investigations, regulations, and sanctions or have been mentioned as targets. Since October last year, when Jack Ma (Ma Yun), founder of Alibaba, criticized Chinese financial authorities, the Chinese government's 'big tech crackdown' has expanded comprehensively.

When China's largest ride-sharing company, Didi Chuxing, was listed on the New York Stock Exchange (NYSE) on the 30th of last month, the Chinese government immediately launched an 'internet security review' against the company citing reasons such as 'preventing national data security risks, safeguarding national security, and ensuring public interest.' Subsequently, downloads of the main Didi Chuxing app and 26 other apps operated by Didi Chuxing were banned.

There are also foreign media reports that the Chinese authorities are preparing ultra-strong sanctions against Didi Chuxing, including fines exceeding 18.228 billion yuan (approximately 3.2 trillion KRW)?which is the largest antitrust fine ever imposed in China on Alibaba in April?along with partial business suspensions and delisting.

After listing, Didi Chuxing's stock price, which once rose to $16.40, dropped by half to $8.06 on the 23rd (local time).

Not only Didi Chuxing but also Alibaba, Tencent, e-commerce company JD.com (京東), service provider Meituan (美團), and online video platform Kuaishou (快手) are major big tech companies under investigation and sanctions by authorities for various issues including antitrust. The Chinese government is accelerating efforts to block big tech companies from listing on overseas stock markets such as the United States. Companies operating internet services with over one million members are now required to undergo cybersecurity reviews by authorities when listing overseas, effectively turning overseas listings of big tech into a permit system.

The Chinese government's crackdown on big tech is leading to a sharp decline in the stock prices of these companies. According to the financial investment industry, the stock prices of nine major Chinese big tech stocks held by domestic investors have fallen an average of 41.1% from their highs this year as of the 23rd.

However, domestic 'Seohak Ants' (Korean individual investors investing in overseas stocks) are viewing the price drops as buying opportunities and are purchasing Chinese tech stocks. According to the Depository, from the beginning of this month to the 23rd, domestic investors have net purchased a total of $47.82 million (approximately 55.1 billion KRW) worth of these stocks. In particular, they net purchased $14.6 million (approximately 1.68 billion KRW) worth of Didi Chuxing, making it the second most bought stock after Tencent ($23.66 million). Researcher Han Jeong-sook of Mirae Asset Securities observed, "As the Chinese government's regulations on platform companies are expected to continue strengthening, it is necessary to be cautious when investing in Chinese companies listed on the Hong Kong and U.S. stock markets, unlike the mainland Chinese stock market."

This content was produced with the assistance of AI translation services.