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For the last couple of weeks, there have been signs that the regulatory headwinds facing China’s tech sector are easing. With that, more investors are gearing up to invest in the market again. Sequoia China, for example, has raised nearly US$9 billion for four new funds to invest in Chinese startups primarily.
But on Monday, Chinese tech stocks fell sharply, driven by Alibaba and Tencent, which alongside several other companies were fined by China’s Market Regulation agency for not reporting properly on previous transactions that may lead to monopolistic hold in the same industry. A total list of 28 deals violated rules, five of which involved Alibaba and 12 of which involved Tencent. Under the anti-monopoly law, the maximum potential fine in each case is 500,000 yuan (US$74,688).
“In spite of small penalty, the punishment has a more significance in sending a warning to other companies in cracking down on monopoly," said Liu Dingding, a Beijing-based internet industry veteran analyst to state media Global Times.
“The latest selloff is triggered by the news of fresh fines on anti-monopolistic practices in the sector. The world is not out of the woods yet and we will continue to see volatile movement in stocks as a general rule of thumb," said Justin Tang, head of Asian research at United First Partners.