Education shares plunge in Hong Kong after China steps up oversight in wake of controversies
Steep declines follow Ministry of Justice’s move to clamp down on sector in wake of allegations of shady financial reporting and lax compliance on required certification
Shares of mainland educational companies plunged in Hong Kong on Monday, after Beijing moved to step up regulatory oversight of a rapidly growing sector hit by allegations of dodgy financing and lax compliance with government rules.
The Ministry of Justice announced late on Friday that it was seeking consultation from the public over banning the expansion of corporations in the non-profit school sector through mergers and acquisitions, by additions to franchise chains or by partnerships in management.
On Monday, Wisdom Education International tumbled 39.8 per cent to HK$4.12, China Yuhua Education Corp slid 36.6 per cent to HK$3.40 and China Maple Leaf Educational Systems dropped 31.1 per cent to HK$4.48. Tianli Education International Holdings fell 37.4 per cent to HK$2.01, China New Higher Education Group slid 32.5 per cent to HK$4.70 and China Education Group Holdings was down 20.8 per cent to HK$9.99. China Xinhua Education fell 27.2 per cent to HK$2.79.
The announcement by the ministry was the latest unsettling development for the sector.
In June, TAL Education, a leader in the sector, was accused by short-seller Muddy Waters of inflating its net profit figures by at least 43.6 per cent and using two sets of improper transactions that inflated its 2016 to 2018 pre-tax profits by up to US$153.2 million, or 28.4 per cent.
TAL denounced the claims by Muddy Waters, saying the report contained “numerous errors, unsupported speculation and malicious interpretations of events,” but its shares slid.