(Bloomberg) -- First came the clampdown on shadow banks. Then it was gaming companies and drugmakers. Now education firms are in the Chinese government’s crosshairs, roiling share prices and reminding investors how quickly their fortunes can change in a country rife with regulatory risk.
RYB Education Inc. and Bright Scholar Education Holdings Ltd. both plunged by records in U.S. trading, while Vtron Group Co. and China Maple Leaf Educational Systems Ltd. paced declines in China and Hong Kong after the government unveiled new rules that prohibit companies from financing for-profit kindergartens via the equity market. The losses echoed declines in Chinese peer-to-peer lenders, gamemakers and pharmaceutical companies after regulators increased scrutiny of the industries this year.
While policy makers say the new rules will help protect consumers, they’ve taken many investors by surprise. That’s adding to jitters in a $5.8 trillion stock market already grappling with a trade war and the weakest economic expansion since 2009. China’s benchmark Shanghai Composite Index has tumbled nearly 20 percent this year, one of the steepest declines worldwide.
To contact the reporter on this story: Sofia Horta e Costa in Hong Kong at shortaecosta@bloomberg.net
To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Michael Patterson
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