Why investors dumped $1 trillion in Chinese equities—and what comes next

And that fear over regulation has begun trickling beyond China’s borders into the rest of the Asia-Pacific region as well—in markets including Japan and Korea.

But the extent of investor fear, while understandable, may be overblown, argues the UBS report. While China regulatory actions have gone up in number and frequency in recent months, fines and remedies imposed on tech companies have been relatively in line with other global economies. China and other Asian regulators may be merely playing catch-up to their U.S. and European Union peers, who have historically been more hardhanded when it comes to antitrust and data privacy, the report argues.

“Our analysis suggests that the broad thrust of antitrust regulation in China is in keeping with that of other major economies,” the report says.

Of course, with China President Xi Jinping still making promises to “correct” practices that hinder fair competition in the future, some would beg to differ with UBS. Major billion-dollar investment firms like Soros Fund Management and Guggenheim Partners are steering clear of China investments for now.

Not just China

Regulators around the globe have turned a more critical eye on the fast-scaling tech and internet companies that dominate their sectors and have become outsize constituents on stock exchanges. Facebook faces the threat of being broken up in the U.S. and Europe over a monopoly of the social media sector. Google may be facing a second antitrust lawsuit from the Justice Department.

Asia has historically lagged behind in anti-monopoly enforcement: Antitrust laws have only been enacted over the past 20 years or so in most of its jurisdictions. Newfound or amended regulations are making their way into policy—using U.S. and EU legislation “as a blueprint,” according to UBS, and they are comparable across regions. “Anticompetitive agreements are prohibited, while merger control is in place,” the report says.

Specifically in Asia, China is one of the first countries to introduce anti-monopoly laws within the internet sector, according to the report. The country’s remedies thus far—Alibaba’s $2.8 billion fine for anti-monopoly violations and Meituan’s $530 million antitrust fine, for example—have been in line with pre-existing global practices, according to UBS. “Investors shouldn’t be concerned that these are especially pernicious, or signal a more aggressive agenda,” the report notes.

And it’s not just China: Korea recently fined Google for anticompetitive practices, and it has taken action against some of its other tech giants, including Kakao, Naver, and Coupang. Japan is investigating Google and Apple over antitrust matters.

UBS expects that, over time, ongoing regulatory enforcement from other rulemakers in Asia will “ease investors’ concerns” over China’s crackdown. But for now, investors are unnerved—and they’re moving money because of it.

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