A) As per the notice received by state council, companies that teach school subjects can no longer accept overseas investment, which could include capital from the offshore registered entities of Chinese firms.
This led to a crackdown in Chinese private education companies which sent shockwaves through the nation`s equity market. China's CSI 300 Index fell close to 8.83% in two days while Hong Kong`s Hang Seng Index fell 7.88% in the same period.
The unprecedented pace of regulatory tightening from Beijing has led to crackdowns in industries from Tech to Real Estates. Previously, the government's move to rein Jack Ma's Ant Group and Didi Global following a cut in leverage in the property industry had sent global investors fleeing.
Investors fear that the latest crackdown in the nation's education, food delivery, and property sectors could expand to other industries such as healthcare, as China looks to tighten its grip on Big Tech and reduce the wealth gap.
Q) Recently listed IPOs have also seen billion-dollar outflows lately. Amid the restrictions placed by the govt. do you think the institutional money would flow into other emerging markets, including India which looks slightly more attractive destination?A) Yes, following the sell-off in China and tightening government regulations, foreign investors are expected to flow to developing countries especially India.
This can be seen in recent buzz in IPO market seeing multiple times subscription and Government relaxing FDI investment limits in certain sectors also foreign Institutional investment in India can flow post privatization of PSU`s.
Q) With a plethora of IPOs planning to hit D-Street such as PayTM, Policybazaar, Nykaa etc. Do you think lot of institutional money will flow into the IPO market?A) After seeing the response received in Zomato IPO with QIP subscription close to 51.79x and the valuations received by Zomato, and recent buzz in the Indian IPO market other following Start-up IPO are also expected to receive similar demand.
Q) Are there any already listed companies that can be a beneficiary of the China crackdown?A) The crackdown in the Chinese Market is expected to benefit Realty and Tech Companies, Real-estate stocks like Godrej Properties, Oberoi Realty & Tech Stocks like Happiest Minds, Route Mobile & Small-cap stocks like Subex Ltd can benefit from the sell-off.
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