An estimated $400 billion in value had been wiped off from U.S.-listed Chinese companies last month because of China's regulatory crackdowns. A report from the Wall Street Journal said the crackdowns have greatly reduced confidence in the future of Chinese stocks with multiple investors now divesting their holdings.
American investors ranging from pension funds to money managers are now rethinking their portfolios as China continues its sweeping reforms to rein in major tech companies. Over the past week, Chinese regulators have imposed new rules to clamp down on monopolies and unfair business practices.
Last week, Chinese regulators imposed new rules to curtail the operations of for-profit tutoring companies in China. Regulators also implemented new rules to protect overworked drivers of food delivery businesses. This was preceded by the imposition of reforms enhancing the oversight of Chinese companies aiming to list abroad.
The reforms fueled large declines across varying sectors in Chinese stocks listed at home and abroad. Education-related stocks plummeted to new lows. TAL Education Group's American Depositary receipts dropped by more than 70% in just a few days, while New Oriental Education & Technology Group dropped by 66%.
Major Chinese tech companies such as Tencent Holdings and Alibaba Group also saw their stocks plummet to new lows amid the sweeping reforms. Didi Global, which recently launched its IPO in the U.S., saw its stock drop after Chinese regulators banned its mobile app and announced an investigation into its operations.
Three of the largest Chinese tech companies listed in the U.S., namely Tencent, Alibaba, and Meituan, have lost more than $237 billion in value over the past week.
Goldman Sachs analysts estimate that Chinese companies with stocks listed abroad may have lost more than $1 trillion in value since February. Analysts expect the losses to grow as China continues its regulatory crackdowns.
According to analysts at Jeffries, investors' reaction to the crackdowns may have been overblown. Analysts said the stocks of companies that were affected by the crackdowns remain to be good investments.
"We view [the] share price pullback about guidelines details as overdone," Jefferies analyst Thomas Chong said.
