by Gordon G. Chang
November 12, 2020

Beijing has cast doubt on the soundness of China's equity markets and, more broadly, on the long-term viability of the country's private sector.

Xi demands absolute obedience, something incompatible with a modern financial system.

.

Investors in Hong Kong this week dumped more than $250 billion in Chinese tech stocks. Particularly hard hit were Alibaba Group, JD.com, Tencent, and Meituan Dianping.

The rout followed the stunning postponement of what would have been the largest initial public offering in history. Ant Group Co., Ltd., an Alibaba Group affiliate, was set, with the overallotment option, to raise $39.5 billion.

Investors were valuing the six-year-old company at $359 billion, making it worth more than American-based behemoth J.P. Morgan and the world's largest bank by assets, the state-backed Industrial and Commercial Bank of China.

On November 3, Shanghai's Nasdaq-like STAR Market and the Hong Kong Stock Exchange announced the suspension about 36 hours before the scheduled start of trading in Hong Kong. The unprecedented actions shocked domestic and international investors.

The now-accepted narrative is that Ma Yun, the driving force behind Ant, angered Chinese regulators in a speech in Shanghai. Another often-heard explanation was that China's stodgy state banks, threatened by the lightly-regulated Ant, retaliated. Others think regulators panicked when they realized that Ant had become a giant.

In any event, Beijing, by ordering the suspensions at the last moment, has cast doubt on the soundness of China's equity markets and, more broadly, on the long-term viability of the country's private sector.





[much more]