China Online Medicine Shares Tumble as Beijing Clarifies Rules
(Bloomberg) -- Shares of Chinese online health-care providers have been battered since the government released draft rules last week that deepened concerns about restrictions on growth potential for the sector.
Ping An Healthcare and Technology Co. has plummeted more than 30% while Alibaba Health Information Technology Ltd. has lost nearly 18% since the proposed regulations were published on Oct. 26. The two stocks are the worst performers in Hong Kong’s Hang Seng Tech Index during the period. Rival JD Health International Inc. has dropped about 6%.
The draft rules, released by the National Health Commission to solicit public comments, clarified several issues -- including a ban on online consultations for initial diagnosis. Medical judgments must be conducted by a registered doctor, and artificial-intelligence software should not be used as a substitute, the rules said. Also, local governments must publish a list of approved providers to improve supervision.
“Companies will have to make sure everything is in compliance with the rules, which will likely slow down the growth of the sector,” said Carol Dou, an analyst at UOB Kay Hian Investment Co.
The tighter scrutiny of online health-care services signals that Beijing isn’t done yet with its crackdown on private enterprises, which has targeted sectors from after-school tutoring to property development and gambling to gaming.
Alibaba Health reported a preliminary net loss for April-September of as much as 320 million yuan ($50 million), or about 15% more than in the same period a year earlier. Meanwhile, Ping An Healthcare slashed its forecast for 2021 revenue growth to around 10% -- from around 30% previously -- according to a note published Friday by Citigroup Inc. analysts including John Yung.
The stock rout in the past week extended the months-long slump of internet health-care stocks amid calls by Chinese state media for ensuring the safety of online prescription-drug sales and tougher rules on how companies handle user data.
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