Investors say China tech firms to boost data security compliance after Didi probe

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A man walks past an office of the Cyberspace Administration of China (CAC) in Beijing, China July 8, 2021. REUTERS/Thomas Peter/Files

SHANGHAI, July 8 (Reuters) – Didi Global Inc (DIDI.N) fell for the third consecutive session on Wednesday, after China ordered the app removed from mobile app stores as part of a broader crackdown on China-based companies with overseas listings. read more

The Cyberspace Administration of China (CAC) has launched security reviews on Didi and three other internet companies, triggering a broader sell-off in overseas-listed Chinese tech firms.

Below are some comments from investors and analysts on the outlook for China’s tech sector:

MAX LUO, PORTFOLIO MANAGER, UBS ASSET MANAGEMENT CO:

“The market needs to revalue relevant sectors. Under previous years’ of barbarian growth, some companies could grow 50% a year. Now, growth rate could come down to 30% under tighter regulations.

Luo added that China’s cybersecurity probe could impact more companies than the anti-monopoly campaign:

“Every (tech) company needs to be compliant on data security, whether you’re an internet company, or a new energy vehicle company, because you collect data.

“If a company is not under probe now, that doesn’t mean it will not be investigated later. People are waiting for a precedent. You need to make investment to become compliant, and that will impact growth.”

BRIAN BANDSMA, PORTFOLIO MANAGER, VONTOBEL QUALITY GROWTH:

“I do think it is a legitimate issue and I don’t think it would be unreasonable to expect that Didi will need to make increased investments to assure data security. I also believe that it is likely Didi will face a meaningful fine.

“I expect continued scrutiny of business practices.

“There has undoubtedly been excesses and limited investment in satisfying regulatory requirements in the past. As investors have limited visibility on whether companies are fully compliant, it is difficult to say where the next potential issue may arise.

“Overall, this should lead prudent company managements to increase internal assessment of businesses practices and reduce a willingness to take risks. It also may have the potential to reduce margins and growth potential.”

ANDY MAYNARD, MANAGING…

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