China is putting the clamps on foreign stock listings for companies in sectors where the government wants to limit foreign investment, such as technology.
It said that foreign ownership can’t exceed 30% in these companies, and no single investor can have more than 10%. Foreigners also are barred from management positions. The rules are effective Jan. 1.
China has been tightening overseas listings since the ride-hailing company Didi Global (DIDI) – Get DiDi Global Inc. Report went public July 30 on the New York Stock Exchange without explicit government permission. The company said earlier this month that it was delisting from the exchange.
Chinese authorities haven’t completely banned foreign initial public offerings. But the new rules make them more difficult and expensive, Bloomberg points out.
Big Chinese technology shares listed in the U.S., such as Alibaba (BABA) – Get Alibaba Group Holding Ltd. Report and JD.com (JD) – Get JD.com Inc. Report, have suffered since the government began attacking their activities last year. So far this year Alibaba has slumped 48% and JD.com has slid 20%.
Morningstar analyst Chelsey Tam says the Alibaba selloff is overdone. He puts fair value at $188, compared with its recent price of $118.
“Our profit forecasts are unchanged after day two of the company’s investor day event,” she wrote Dec. 12 .
“Alibaba reminded investors its goal is to be an all-inclusive retail giant in China….
“Alibaba still needs to be able to identify and meet the fast-changing consumer demands quickly, offering affordable products and services to consumers in less developed areas. … We think Alibaba’s execution in meeting these demands is not solid.
“However, it appears Alibaba is working hard to combat these challenges.”