Hong Kong Stocks Fall as China Technology Crackdown Continues

Asia-Pacific Shares Mostly Lower; Hong Kong Down Over 4%; Japan Bucks Trend with Modest Gain

The major Asia-Pacific stock indexes are trading mixed but mostly lower with Japanese stocks bucking the overall trend as investors returned following holidays on Thursday and Friday.

One of the catalysts behind the selling pressure was tensions between Washington and Beijing as the two economic powerhouses kicked off high-level meetings. Another reason for the shift in sentiment was heightened regulator pressure from the government on Chinese tech and education stocks. Additionally, investors continued to monitor the COVID situation in Asia, particularly its potential influence on the pace of the economic recovery.

Cash Market Performance

In the cash market on Monday, Japan’s Nikkei 225 Index settled at 27833.29, up 285.29 or +1.04%. Hong Kong’s Hang Seng Index finished at 26192.32, down 1129.66 or -4.13% and South Korean’s KOSPI Index closed at 3224.95, down 29.47 or -0.91%.

In China, the benchmark Shanghai Index settled at 3467.44, down 82.96 or -2.34% and in Australia, the S&P/ASX 200 Index finished at 7394.30, down -0.10 or 0.00%.

China Shares Tumble on Regulatory Clampdown; Education Firms Selloff Heavily

China shares fell sharply to their lowest levels this year on Monday as investor worries over the impact of government regulations kneecapped the education and property sectors, after Beijing barred for-profit tutoring in core school subjects.

The shakeout in China’s $120 billion private tutoring sector follows Beijing’s announcement on Friday of new rules barring for profit tutoring in core school subjects to ease financial pressures on families. The policy change also restricts foreign investment in the sector through mergers and acquisitions, franchises, or variable interest entity (VIEs) arrangements.

Hong Kong Stocks Fall as China Technology Crackdown Continues

Stocks in Hong Kong were pressured on Monday after China’s antitrust regulator ordered Tencent to give up its exclusive music licensing rights and slapped a fine on the company for anti-competitive behavior, as Beijing continues to crack down on its internet giants at home.

The latest regulatory crackdown comes as Beijing continues to curb the power of its domestic technology firms that have grown to become some of the most valuable companies in the world.

China’s widening clampdown has ranged from anti-competitive practices, to data security as well as increased scrutiny on Chinese companies with overseas listings in the U.S.

Nikkei Tracks Global Peers Higher, but Virus Woes Undermine Mood

Japanese shares ended higher on Monday, catching the tailwind from a bounce in global peers on positive corporate earnings, though gains were curbed by concerns that domestic COVID-19 infections could further dampen the country’s economic recovery.

The country’s benchmark Nikkei 225 Index rose after a four-day weekend that marked the opening of Tokyo Olympics before shedding a part of the gains into the close.

Australia Shares End Flat as Energy, Gold Stocks Drag

Australian shares pulled back from record highs to end flat on Monday as gains in mining stocks were offset by losses in energy and gold stocks, while rising domestic coronavirus cases also added to investor worries.

Mining stocks jumped as much as 1.5%, boosted by strong iron ore prices as a recovery in steel margins in China buoyed sentiment. Meanwhile, energy stocks dropped 1.4% as oil prices fell on concerns about fuel demand from the spread of COVID-19 variants and floods in China. Finally, gold stocks fell to their lowest since April 7, hurt by weak bullion prices, with the largest-listed gold miner Newcrest losing 1.5%.

In COVID-related news, the most populous state of New South Wales, home to Sydney, on Monday reported a rise in fresh COVID-19 cases despite an ongoing stay-at-home order.

For a look at all of today’s economic events, check out our economic calendar.

Published by

James Hyerczyk

James A. Hyerczyk has worked as a fundamental and technical financial market analyst since 1982. His technical work features the pattern, price and time analysis techniques of W.D. Gann.