Jack Ma ‘Arrested’ and the SEC’s DIDI Investigation Whack China Tech Stocks

Mainland traders will have a deep blow on their hands when they return to their computer screens on Thursday after a long holiday. The Hong Kong market saw heavy selling on Wednesday by Chinese tech names such as Alibaba Group Holding ((BABA) and HK:9988), falling 3.7% on the day.

Investors panicked about anything.

When they thought Alibaba lightning rod Jack Ma had been arrested for publishing seditious content on the Internet, he panicked for a second. It wasn’t true, but it was a lot of fun.

Investors were also spooked by ride-hailing operator DiDi Global (DIDI), which noted in its annual report that it was being investigated by the US Securities and Exchange Commission over its disastrous initial public offering last June.

Investors were also stunned by what the Fed might do at Asian time tonight. They were terrified of selling from insiders and big investors. Markets in Shanghai and Shenzhen will resume trading on Thursday after a break from Friday for Labor Day. Hong Kong was closed only for Monday.

Negative sentiment pulled the Hang Seng Tech index down 3.3% for the day in Hong Kong.

Online health clinic and pharmacy JD Health ((JDHIY) & HK: 6618) bore the brunt of sales, down 13%, after a filing by its chairman showed. But its rivals, Alibaba-affiliated Ali Health (ALBBY and HK:0241), were down 7.5%, as well as heavy losses for Ping An Good Doctor (PIAHY and HK:1833), down 5.1%.

Video-sharing site Bilibili ((BILI) & HK:9626) fell 8.2% in Hong Kong ahead of earnings ahead of the start of US trading on Friday. “Chinese YouTube” warned on April 29 that advertising and e-commerce sales would be hit by China’s COVID crackdown and lockdown in Shanghai, where strict movement restrictions halted shipments of goods.

Grocery delivery app Meituan (MPNGY & HK:3690) dropped 4.6% after its filing showed venture capitalist backer Sequoia Capital had reduced its stake by nearly US$800 million. Its ability to deliver goods has also been disrupted in Shanghai and Beijing, not to mention 44 other cities with some form of lockdown.

The broader market Hong Kong benchmark, the Hang Seng index, ended the day with minor losses, down 1.1%, indicating that selling was mainly in tech.

wrong mother identity

A sudden drop in Alibaba shares on Tuesday revealed a bizarre incident when it comes to Chinese tech, and how policy-driven factors are affecting the sector.

Alibaba’s shares suddenly dropped 9.0% after state broadcaster CCTV reported that someone named Ma was using the Internet to destroy the state and endanger national security. He was detained by authorities in Hangzhou, Alibaba’s hometown, on suspicion of committing suicide.

Using information from the state-security bureau, which has launched a “criminal-enforcement action” against the man, CCTV said the man is Ma XX, which obscures the second character in the Chinese name. This prompted investors to connect the points that the person under investigation is Jack Ma, the head and co-founder of Alibaba, whose Chinese name is Ma Yun.

Police later clarified that the man’s name contained three Chinese characters – in other words, it was the mystery man Ma XX XX who was arrested. Because he controls Jack Ma, Alibaba’s shares bounced back. Speculation was being attributed to Ma Xiaohui, a local Chinese Communist Party official who is already under investigation. Ma, the former deputy mayor of Hangzhou, was kicked out of the Chinese Communist Party in March for “serious breaches of party discipline”, the polite term the party uses for corruption.

But that too seems to be off the mark. According to the state-owned, the Ma in question works in the information technology and hardware R&D Global Times, The man reportedly colluded with shady “foreign forces” who brainwashed him to spread “rumors and disinformation” and publish a “so-called independence declaration” on the Internet.

I say “allegedly” because the investigation is ongoing. However, it is indicative of how the police, the Communist Party of China and the law courts deal with railroad cases. Global Times Reports all activity as fact. “Ma also targeted youth and university students, inciting them to engage in activities that tarnish the country and the people,” the state newspaper said. “Ma’s activities are in violation of the laws of China,” it concludes. “Internet has no place beyond law and those who try to violate the interests of the country, undermine its security or betray the country and people will be punished severely as per the departments concerned.”

In other words, this particular mother is in big trouble.

Meanwhile, Alibaba shares were selling in line with the tech sector on Wednesday, sending them down 16% for the year. The Chinese Politburo promised to stabilize capital markets and said it could soon “end” the reform of the tech industry, despite their very good rally around the Labor Day holiday, despite today’s 10.2 % is up.

And then there’s sister…

DiDi Global announced in its earnings release for the first time that it is under investigation by the US securities watchdog. Days after its IPO on June 30 last year, Chinese regulators barred it from signing new customers and took its apps from Chinese stores.

“Following our initial public offering in the United States, the SEC contacted us and inquired regarding the offering,” Didi acknowledged in its annual report. “We are cooperating with the investigation,” said Didi, subject to strict compliance with Chinese law, but gave no details. “We cannot predict the timing, outcome or consequences of such investigations.”

Didi cited a long list of risks in her report; This is a list full of lawsuits, investigations and regulatory inquiries, mainly on the Chinese side. The SEC also wants access to DiDi’s audit, as it does with all Chinese listings, and could force them to delist all of them if Chinese regulators don’t allow access.

To be honest, I would be surprised if Didi was global No It is being investigated by the SEC, as are several class action lawsuits that claim the company should not have held an IPO when it did. The SEC will investigate whether the company had any sense that it might run away from the Chinese side.

I believe that DiDi complied with the general rules of listing out of China and satisfied the rules and regulations of securities regulators. But it broke a “suggestion” – a then-non-existent rule about data security – from a previously little-known department now charged with cybersecurity. It’s definitely a victim of incredibly bad timing. If it caught any air of potential suspension, it would be really dumb, and those class action suits might have some basis.

DiDi has announced its intention to delist in New York and re-list in Hong Kong. DiDi shareholders are due to vote on that plan on May 23. With DiDi’s share price down about 86% from the US$14 listing price, many of them want some sort of repair.

Most Asian markets ended the day with lower losses but still losses, with Tokyo’s Topix broad market index down 0.1%, Korea’s Kospi a similar amount, and the Australian central bank’s decision up a surprisingly large 25 basis points. pushed to The S&P/ASX 200 index is down 0.2%.

Tonight will be another sleepless night for active investors. The Fed’s interest rate decision will come at 2 a.m. for traders in Hong Kong, Beijing and Singapore, and 3 a.m. if you’re in Tokyo. So we will see a reaction on Thursday when they take some rest after digesting that news.

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