I'm increasing my position in all Chinese stocks because this month's activity shows Chinese antitrust regulators are doing what regulators in other jurisdictions should be doing — reining in tech unicorns to protect user and consumer interests.
You bet — this is just as much making billionaires kiss SAMR (State Administration for Market Regulation)'s ring as it is ensuring a fair market. This includes breaking up (Tencent's music licenses) fining (2.7 billion on BABA) or investigating (DIDI for breaching Chinese data laws) these publicly listed champions.
But US analysts are getting Chinese antitrust and capital markets activity all wrong. This is good news for the long term viability of China's internet industry, just like the DOJ antitrust hit on Microsoft (US v Microsoft Corp, 1998 Netscape case) in the 90's was good for the long-term viability of the nascent internet industry then.
Short term good for these individual companies? Who knows, Microsoft kept going way up after the 1998 investigation up until the dotcom bubble burst, and then it went sideways after it was ordered to change its practices in the 2001 settlement.
Long term? Either individually or as a part of a Chinese internet ETF, the giants' losses are the rivals' gains. This month will vindicate broad exposure to the Chinese internet sector, at the expense of investors looking for CCP darlings or favourites that never need to innovate thanks to government coddling.
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