China: Stocks of Some Education Companies Tumble Due to Hearsay
The drop follows rumors of impending regulatory changes in China that would curtail vocational education.
The stock of six Chinese private professional education companies have lost up to two thirds of their value in just three days, starting Jan 25, 2022.
| Company | Stock (Jan 25) | Stock (Jan 27) | Drop rate (%) |
| China Education Group | $11.0 | $4.9 | -55% |
| China YuHua Education | $2.2 | $1.6 | -27% |
| China Kepei Education | $2.9 | $2.2 | -24% |
| China New Higher Education | $3.0 | $2.1 | -30% |
| China Xinhua Education | $1.5 | $1.3 | -13% |
| Neusoft Education Technology | $5.1 | $3.7 | -27% |
These companies provide vocational education degrees, programs, and consulting services under the Dual Track higher education system.
The sudden stock collapse was caused by an unconfirmed anonymous email spread among traders. According to the rumor, a new round of stricter regulations on the vocational education sector would be implemented, preventing these organizations from:
- Raising tuition fees
- Acquiring school-related assets
- Expanding via mergers and acquisitions
The three measures above had already been imposed on K12 after-school tutoring companies in the context of the “Double Reduction Policy”, covered in a previous Class Central exclusive.
Government Position
The new unconfirmed regulations are at odds with the Oct 2021 announcement by the Chinese government, “On promoting the development of high-quality modern vocational education”, which encouraged vocational education companies to lead the establishment of industry-based vocational programs in China.
Even so, fears among investors of the “Double Reduction Policy” expanding to other related sectors never disappeared, and the whole market remains exceptionally sensitive to news about potential new policy and prone to panic.
In a recent conference call, the China Education Group noted that they hadn’t been notified by the government’s education authorities of any impending regulatory changes. They assured that the company operations remained normal.
The stocks of the impacted companies have started to bounce back.
Tags
