CX Daily: Meituan Shares Plunge As New Regulations Threaten Higher Costs
Meituan shares plunge 14% as new regulations threaten higher costs
Meituan’s Hong Kong-traded shares plummeted 14% Monday, the biggest drop on record, after the Chinese food delivery giant was ordered to pay social insurance for delivery drivers, threatening to significantly drive up costs.
The Chinese government ordered that online food delivery platforms not set evaluation criteria based on optimization algorithms, respect the rights of delivery drivers and ensure that workers earn at least the local minimum income with social insurance. The sweeping set of guidelines was issued Monday by seven government agencies including the powerful State Administration for Market Regulation (SAMR) and the Ministry of Human Resources and Social Security.
China stocks retreat in wake of regulatory crackdown
Stocks of Chinese companies continued their recent slump across a range of market segments in the wake of Beijing’s regulatory crackdown.
The Hang Seng Tech Index, a gauge of many Hong Kong-listed Chinese stocks, plunged as much as 10% Tuesday, while the yuan slid to its weakest since April against the U.S. dollar, and investors dumped even Chinese bonds.
Similar sentiments prevailed on Chinese mainland markets. The Shanghai Composite Index fell 2.49%, and the Shenzhen Component Index lost 3.67%.
FINANCE & ECONOMY
The headquarters of Anxin Trust in Shanghai on March 17, 2020. Photo:VCG
Anxin Trust to raise $1.39 billion in state-backed bailout
China’s Anxin Trust Co. Ltd., which is being bailed out by the state after failing to repay billions of yuan to creditors and investors, unveiled details of a restructuring plan announced last week aimed at restoring its finances and preventing its debt crisis from damaging financial stability.
The company will raise as much as 9 billion yuan ($1.39 billion) by selling shares to Shanghai Di’an Investment Management Co. Ltd., a special purpose vehicle set up last week by local state-owned companies and the operator of a state-backed bailout fund for trust companies. On completion of the deal, Shanghai Di’an will hold a controlling stake of 44.44% in the company, it said in a filing (link in Chinese) Friday with the Shanghai Stock Exchange.
China crackdown wrecks demand for loans to finance overseas deals
Chinese companies’ use of debt to pay for overseas expansion is on track to shrink to a seven-year low thanks in part to Beijing’s sweeping regulatory crackdown.Foreign currency-denominated loans taken out by Chinese businesses to finance outbound mergers and acquisitions shrank to $2.6 billion in the first half, Bloomberg-compiled data show. That’s worse than the $3.4 billion a year ago in the depths of the pandemic. Anything less than about $1.7 billion in the second half would make this year the weakest for this corner of the debt market since 2014.
China Inc.’s overseas shopping spree has been cooling since 2017 as Beijing imposed curbs on the risks a debt-fueled binge could pose to the financial system, while the pandemic dampened appetite for leverage to expand abroad. Foreign scrutiny over purchases has also intensified amid Sino-U.S. tensions.
Deadly floods expose emergency response flaws in Zhengzhou hospitals
Torrential rain and flooding that claimed dozens of lives in Zhengzhou, Central China’s Henan province, also exposed flaws in local hospitals’ emergency response systems.
A power outage in the First Affiliated Hospital of Zhengzhou University, the city’s largest medical institution, caused more than 11,000 patients to be evacuated or transferred to other hospitals, and medical workers had to use manual ventilators to help some patients breathe.
BUSINESS & TECH
An Evergrande spokesperson said late Monday that the company “deeply regrets” the downgrades and does not understand why S&P made them. Photo: VCG
Evergrande cancels special dividend, gripes about S&P downgrade
Investors continued to sell China Evergrande Group’s stock Tuesday as the debt-ridden property giant scrapped a planned special dividend and after global ratings agency S&P cut its credit rating.
Evergrande said it decided to cancel the payout based on its own consideration about current market conditions, the interests of shareholders and creditors, and the company’s “long-term development,” according to a Tuesday filing with the Hong Kong Stock Exchange.
The decision came as analysts were speculating that the company planned to use the special dividend to revive investor confidence, Bloomberg reported Monday.
Shenzhen wants to end ban on officials taking key positions at state firms
A new draft regulation being considered by Shenzhen lawmakers will allow leading Communist Party and government cadres to take part-time roles in state-owned companies, a practice that has been banned by the central government since 2013 to stop corruption and unfair market competition.
The draft proposes that employees of state-invested enterprises and government departments can hold part-time positions as directors and supervisors of state-owned companies, but that they should not receive salaries, bonuses or allowances.
Meituan borrows electric car designs to develop self-driving delivery vehicles
Meituan and Li Auto Inc. signed an agreement allowing the food delivery giant to use the carmaker’s intellectual property (IP) to develop autonomous delivery vehicles.
The Beijing-based electric-vehicle maker disclosed the tie-up in a filing ahead of its newly approved dual primary listing in Hong Kong.
The agreement was sealed June 3 and runs until the end of 2023, the filing said. It allows Meituan to develop its own products based on Li Auto’s IP left over from an abandoned smart electric vehicle project. Meituan holds 13.23% and CEO Wang Xing, 6.76% of the automaker.
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