After the recent aggressive actions of China’s government against the most profitable sectors, investors are trying to predict what to expect next. Eventually, they have found a new method to forecast the movement of the Chinese companies’ shares. They began scouring Xi Jinping’s speeches to find clues about which industries might face difficulties in the near future.
At first glance, it may seem a rather meaningless task to scrutinize various speeches that usually contain patriotic slogans, promises, and encouraging statements. However, this time, it is a different kettle of fish. Market participants stress that the true meaning of a speech may not always be fully understood. It may hide some clues about the future actions of the Chinese authorities. For instance, by analyzing Xi Jinping's tedious speeches, analysts saw disapproval of obscene content on the Internet, inequality in education, and unfair competition in the real estate market near school districts. Earlier, market participants did not pay much attention to Xi's criticism of teachers who preferred private tutoring to work in public schools.
Investors realized their mistake only after China banned for-profit tutoring in core education to rein in the country's private education industry at the end of July. Educational companies were not allowed to raise capital via stock markets or attract foreign capital. As a result, the shares of one of the largest companies in this field, New Oriental Education, crashed by 47%.
