TikTok rival Kuaishou drops 13% as CEO warns of more regulation, bringing 3-day Chinese tech rally to an abrupt end
- Chinese TikTok competitor
Kuaishoulost as much as 12.5% on Thursday.
- The slump dragged down the Hang Sang Tech index, which had risen 9% over the previous three days.
- China's cyber regulator has fined Kuaishou and other internet companies.
Chinese TikTok competitor Kuaishou lost as much as 12.5% on Thursday after the company reported mixed earnings and warned that Beijing's regulatory onslaught would pinch its revenues.
The firm's Hong Kong-listed shares fell as low as 67.80 Hong Kong dollars from the previous day's closing price of HK$77.50. The slump dragged down the Hang Sang Tech index, which had risen 9% over the previous three days.
Kuaishou's Wednesday earnings call showed surging revenues, up 49% in the second quarter, but a worse-than-expected net loss. On the call, CEO Su Hua projected that a wave of new cyber rules would begin to eat into revenues as Kuaishou adapts to the new regulatory regime.
China's cyber regulator has fined Kuaishou and other internet companies for illegal data-collection practices and for failing to curb sexually suggestive content featuring minors, according to the Wall Street Journal.
"We will resolutely crack down and educate them on these behaviors," said Su, referring to users who post inappropriate videos. "This work will take lots of time."
Kuaishou, which translates literally to "fast hand," rose quickly both as an alternative short-video platform and as another promising Chinese tech prospect. Yet China's regulatory campaign against internet firms has devastated Kuaishou's share price, knocking off 72% since the start of June.
Analysts had mixed reactions to the news. Jeffries analysts maintained a price target of HK$137, with one saying Kuaishou was at a "sweet spot of content consumption evolution," according to the Financial Times.
But China Renaissance Securities analysts lowered revenue forecasts for the company, on the expectation that new regulations would curb advertising and e-commerce growth, according to the Journal.
Kuaishou shares closed at HK$70.40, down 9.2% on the day.
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