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China Stocks Hit Hard As New Regulations Squeeze Tech Companies

China stocks dropped Tuesday, including Alibaba (BABA), JD.com (JD) and Tencent Holdings (TCEHY), after antitrust regulators issued new rules aimed at banning unfair competition.




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The new rules, proposed by China’s State Administration for Market Regulation, affect various areas, including false advertising and the handling of consumer data.

Alibaba stock dropped 4%, near 175.40, during afternoon trading on the stock market today. JD stock fell 3.7%, near 64.20, while Tencent moved down 2.7%, near 55.90. Also falling were Vipshop Holdings and Baidu, down 5.1% and 3.5%, respectively.

China stocks have been under heavy pressure, with valuations cut roughly in half this year due to an ongoing government crackdown high-tech China stocks.

China Stocks Hit Hard This Year

After hitting a record high of 349.32 in October, Alibaba has fallen roughly 50% from that peak. JD hit a record high of 108.29 in February and now is off 40%. Tencent is down 44% from its high of 99.40 in February. Vipshop has plunged 68%, while Baidu has sunk 60%.

Among the new rules outlined by regulators, China internet companies were told not to conceal negatives reviews and only promote positive one. Operators should not use data and algorithms to collect and analyze competitors’ trading information.

They also can’t take user data and algorithms to influence user choices. And operators can’t provide false data, such as the number of clicks on a piece of content.

The new rules will go into effect after public opinion on the new rules is received, ending on Sept. 15.

Tencent and Vipshop report quarterly results Wednesday morning. Among other China stocks, Alibaba reported earnings early this month.

Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.

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