Investors in China wary as alcohol and e-cigarettes stocks become latest casualties
RLX Technology Inc RLX.N down 4.5% after article
CSI Liquor Index closed down 1.47% on Thursday
Adds comments from head of private equity firm
SHANGHAI, Aug 5 (Reuters) - Investor jitters over which sectors Chinese regulators might target next spread to the spirits and e-cigarette industries on Thursday after state media ran critical reports which knocked companies' shares.
State media attention on the dangers of alcohol and e-cigarettes follow various articles in Chinese publications which pilloried the gaming industry for its adverse impact on Chinese youth, triggering a sell-off in the sector.
The falls on Thursday demonstrated how investors remain on edge and on the hunt for clues about which companies might be vulnerable to tighter state intervention.
Crackdowns have hit the technology, property and education sectors already, and the head of a Chinese private equity firm said although China's regulatory stance was expected due to its focus on "common prosperity", the specific tactics used were surprising and have caused shockwaves.
"It's damaging to China's reputation as an investment destination in the short term," CITIC Capital CEO Yicheng Zhang, whose firm manages $36 billion in assets, told the Reuters Global Markets Forum on Wednesday.
However, Zhang said the questions raised over China's investability are "probably a bit overdone" and had left some valuations looking quite cheap.
As well as alcohol and e-cigarettes, shares in fertilizer companies were hit after China's top market regulator announced late on Wednesday that it would launch an investigation into fertilizer companies suspected of driving up prices.
Shares in RLX Technology Inc RLX.N, China's leading e-cigarette brand, and smaller peers Smoore International Holdings Ltd 6969.HK and China Boton Group Co Ltd 3318.HK tumbled after state news agency Xinhua published a report saying that minors were gaining easy access to e-cigarettes.
Similar market sentiment took hold of liquor related stocks, after the Ministry of Science and Technology posted an article citing a study that linked alcohol consumption to cancer.
China's CSI Liquor Index closed down 1.47% on Thursday, with shares in Kweichou Moutai Co Ltd 600519.SS and Wuliangye Yibin Co Ltd 000858.SZ down 1.5% and 3.1% respectively.
Critical articles in Chinese publications had previously pilloried the gaming industry for its adverse impact on Chinese youth, triggering a sell-off in the sector.
An op-ed published Tuesday in a state-backed media outlet calling video games "spiritual opium" caused widespread speculation that the gaming sector would be the next target for Chinese regulators, and caused shares in Tencent Holdings Ltd 0700.HK, China's largest gaming company, to fall over 10% on Tuesday. https://www.reuters.com/technology/tencent-falls-after-china-media-calls-online-gaming-spiritual-opium-2021-08-03/
The article was subsequently edited and re-published, but media outlets have continued to publish critical pieces. On Thursday, China's Securities Times ran a piece calling for an end to tax breaks for gaming companies
(Reporting by Josh Horwitz and Andrew Galbraith in Shanghai and Divya Chowdhury in Mumbai, additional reporting by Winni Zhou in Shanghai, Hallie Gu in Beijing; Editing by Elaine Hardcastle)
((Josh.Horwitz@thomsonreuters.com; +86 21 20830007;))
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