China’s ban on kindergartens raising funds in capital markets sparks education stock sell-off, clouds preschool sector’s prospects
- Latest policy bans private kindergartens from listing or raising funds from listed companies
- Move weighs on fears over tightening of private education sector
China’s ban of kindergartens raising funds in global capital markets to rein in the private preschool market has sent education stocks plummeting from Hong Kong to New York, as school operators and investors struggle to read the government’s longer term intentions for the billion-dollar sector.
The State Council, China’s cabinet, announced in a policy document on Thursday evening it is banning private kindergartens across the nation from seeking public listings either independently or as part of a portfolio and for-profit kindergartens from raising funds from listed companies.
The latest restrictions are part of Beijing’s drive to strengthen regulation of the country’s increasingly wayward private education sector, as operators put profit over affordability.
Education stocks tumbled broadly on fears that existing listed school operators may be forced to dispose their preschool businesses or even to delist, as the document did not address the issue.
China Maple Leaf Educational Systems plunged 19 per cent in Hong Kong on Friday, tracking the 53-per cent drop of preschool operator RYB Education on the New York Stock Exchange on Thursday. In China, Vtron Group Co plunged by the daily 10 per cent limit.
The sell-off also underscores the risks of doing business and investing in China, where sudden policy changes have hit industries from online gaming to entertainment this year.