China’s new antimonopoly rules will have limited impact for now: Analyst

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Jack Ma, founder of Alibaba Group, during the opening ceremony of the 3rd All-China Young Entrepreneurs Summit on September 25, 2020 in Fuzhou, Fujian Province, China.

Lyu Ming | China News Service | Getty Images

China announced new antimonopoly rules over the weekend – but according to a market observer, that shouldn’t have any major impact on the market for the time being.

“The new regulation is still a bit sketchy in detail,” Hao Hong, managing director and research director at Bank of Communications International, told CNBC’s “Street Signs Asia” on Monday.

China’s State Administration for Market Regulation (SAMR) tightened restrictions on China’s internet giants like Alibaba and Meituan and introduced new guidelines on Sunday to curb monopoly behavior. The new rules formalize a draft published months earlier.

Still, the development appeared to have little impact on the stocks of the Chinese internet giants. Most of them were still in positive territory in Hong Kong Monday afternoon: Tencent rose 0.82%, Meituan rose 1.54% and JD.com rose 1.14%. Only Alibaba bucked the trend, falling about 0.16%.

Monday’s market action was in stark contrast to the volatility in November, when Hong Kong-listed Chinese tech giants plunged after the regulator’s initial announcement. The billion dollar market value was wiped out after the antitrust guidelines were first proposed.

Hong said the market is taking time to digest the details of the latest anti-monopoly policies, adding that China’s internet giants have been around for years and already have “very solid” market positions.

“The regulation begins with very good intent,” said Hong. “The fact is that … the market position … of these large Internet platforms is currently very difficult to achieve.”

While recognizing that the new rules “make it easier for the smaller people to grow,” Hong added that many of the big internet players like Alibaba and Tencent have also “put their own money into many internet startups”. “

Some well-known examples of such investments include Alibaba’s stake in financial technology giant Ant Group and support for Tencent through short video company Kuaishou, which attracted strong interest on Friday during its $ 5 billion Hong Kong listing the investor recorded.

Beijing’s heightened control comes at a time when the tech industry is falling under the regulatory limelight around the world, with similar moves in both the US and the European Union.

– CNBC’s Evelyn Cheng contributed to this report.