Chinese tutoring platform New Oriental slides to record low after Xi call for tougher rules leads to sell-off in sector stocks

The stock sank by as much as 15 per cent to HK$70.80 in Tuesday intraday trading, extending a 7.3 per cent decline it recorded a day earlier

New rules limit after-school teaching and students’ homework time, which could prompt parents to cut their children’s tuition, Bloomberg Intelligence analyst says

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A New Oriental advertisement in Shanghai. The two-day rout has erased US$1.5 billion from its market capitalisation. Photo: Shutterstock

Published: 2:47pm, 25 May 2021Updated: 4:43pm, 25 May 2021

Shares of New Oriental Education & Technology Group, China’s second-largest tutoring platform by market value, on Tuesday tumbled to their lowest level since the company’s listing in Hong Kong last year.

The stock sank by as much as 15 per cent to HK$70.80 in Tuesday trading, extending a 7.3 per cent decline it recorded a day earlier, as a pledge last week by Chinese president Xi Jinping to crack down on the sprawling industry continued to spook investors. It slipped 0.1 per cent to HK$83.50 at the close.

The two-day rout has erased US$1.5 billion from its market capitalisation. Among its smaller competitors, Tianli Education International Holdings retreated 4.4 per cent to HK$4.37 after falling 7.3 per cent on Monday, while Hope Education Group lost 3.7 per cent to HK$2.36.

“The new rules limit after-school teaching and students’ homework time to protect children’s development, which could prompt parents to cut their children’s tuition,” said Catherine Lim, an analyst at Bloomberg Intelligence in Hong Kong.

The declines follow a meeting chaired by Xi on Friday, in which he called for the tougher scrutiny of the tutoring industry and a lighter burden on students. A clampdown will focus on the business qualification of after-school tutors, false advertising and overcharging for services, according to the meeting.

On Sunday, rumours were circulating on the internet that the education administration of Beijing’s Haidian district will unveil rules that will ban students in the area from taking after-school courses during the summer holiday and institutes from putting out advertisements for enrolment. The administration denied the rumours on Tuesday.