Didi offers ‘sell on Friday’ lesson to hedge losses as China humbles tech billionaires, investors in latest regulatory offensive
- A new round of regulatory review is only starting, according to Bocom International; UBS Asset Management says the curbs are not over yet
- Chinese investors have in the past lightened their positions to skirt weekend surprises from unscheduled PBOC policy decisions
“There is plenty of regulatory uncertainty,” said Hong Hao, managing director at Bocom International Holdings in Hong Kong. “The review is just starting and will be ongoing. In the near term, the uncertainty will make people think twice” about buying or adding to their positions, he added.
Some of the biggest sell-offs this year included a 5.7 per cent plunge on February 26, and a 2.2 per cent decline in two early weeks of May, according to the Post’s calculations. On average, investors avoided a 0.6 per cent loss if they sold Chinese tech stocks on Fridays.
Other seismic episodes in recent years included the US announcements of tariffs on Chinese goods, the assassination of Iran’s top general and Trump’s market-hitting tweets.
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“The government will push ahead with reforms concerning data security, antitrust and the overall business environment,” said Luo Di, the firm’s portfolio manager in Shanghai. “Problems from these fast-growing sectors have begun to surface now after years of expansion. The [regulatory] curbs are not over yet.”
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Beijing’s choice of unveiling major policy changes on weekends may be well-intentioned, perhaps to give investors more time to digest and evaluate the implications. US investors will have to weigh the risks of owning [Chinese] American depositary shares at a time when tensions between Beijing and Washington remain elevated, according to BCA Research.
“The incident highlights that Chinese authorities’ clampdown on domestic new economy companies is clearly not over,” analysts at BCA said in a report on July 7. “All global investors will have to balance the allure of China’s vast addressable market with the possibility that officials may reshape company prospects at the stroke of a pen via the imposition of regulatory strictures.”