China's new regulations on fintech, big tech, after-school tutoring, cryptocurrency, and carbon emissions over the past nine months may have long term positive implications, but in the near term, they have mauled the markets, in particular the Hong Kong market.

Under the new governance paradigm, China appears to be attempting to check the rise in corporate power and rebalance the share of the economy in favour of labour, which could result in decline in corporate profit share, notes Morgan Stanley in an Aug 20 report. “We see regulatory head- winds for sectors associated with rising tensions of social inequality, environmental sustainability, and data security risks, while the new framework provides policy support to advanced manufacturing, tech localization, and renewable energy,” Morgan Stanley says. The risk, is over-regulation, it adds.

Hence, data-heavy tech and platform companies and property could remain under pressure amid the regulatory reset, while semi localization, cybersecurity, domestic brands catering to the mass market, innovative drugs, bio- tech, and green economy may enjoy support, according to Morgan Stanley.

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