According to Wall Street Journal, the People’s Bank of China is preparing to slap a potential record fine on Tencent’s WeChat Pay mobile network for violating anti-money laundering regulations.
Financial regulators found that WeChat Pay had lapses in compliance with “know your customer” and “know your business” regulations. They also discovered the mobile payments network had evidence of money laundering.
An investigation into money laundering would be a new chapter in Beijing’s tech crackdown, a move that has already decimated hundreds of billions of dollars in market cap from ride-hailing and e-commerce to online education companies. Until now, WeChat has been untouched by regulators who have gone after competitors such as Alibaba Group Holding Ltd. and Meituan.
Tencent’s shares trading in Hong Kong closed down nearly 10%.
According to Bloomberg-compiled data, the spread for Tencent’s dollar bond due 2030 widened 22 basis points to 228 basis points, on pace for a record high.
The impending fine for Tencent casts doubts over its ability to expand its fintech division. WeChat Pay is critical to increasing its online transactions business.
Elsewhere, Chinese stocks listed in Hong Kong plunged on their worst day since the global financial crisis, as concerns over Beijing’s relationship with Russia over Ukraine. The Hang Seng China Enterprises Index sank 7.2% on Monday, the largest daily drop since November 2008.
The Hang Sang Tech Index plunged 11%.
Also weighing on China stocks are COVID closures in Shenzhen’s technology hub region, which could be clouding the earnings outlook of companies in that area.
Marvin Chen, a strategist at Bloomberg Intelligence, “doesn’t see a major catalyst in the near term” to support dip-buying in Chinese tech stocks as they’ve slid for more than year without a defining bottom in sight.
“For a material re-rating of China tech, we may need to see a shift in regulatory tone, and we didn’t get that from the recently concluded NPC meeting,” Chen said.
Mon, 03/14/2022 – 09:05
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Author: Tyler Durden