Chinese Online Health Companies Extend Losses Amid Sector Sell-Down

By Yifan Wang

Shares of Chinese online health companies dropped in afternoon trade in Hong Kong, as a local newspaper report triggered worries about the impact of new industry regulations on the sector’s growth.

Alibaba Health Information Technology Ltd. lost as much as 17% after opening down 2.9%. JD Health International Inc. shed 16% while Ping An Healthcare & Technology Co. dropped 6.8%.

The sector’s selloff came after a Chinese newspaper, 21st Century Business Herald, published a story on Wednesday analyzing the potential negative impact from a draft rule that would prevent third-party e-commerce platforms from selling drugs directly to consumers online.

But analysts said the proposed rule, if implemented, is unlikely to cause substantial disruptions for major industry players.

“We believe this would have minimal operational impact on Internet healthcare leaders, such as Alibaba Health and Ping An Healthcare,” Citi analysts said in a note on Wednesday, adding that these companies’ third-party businesses don’t participate in direct online drug sales, and thus already comply with the proposed regulations.

The new rule was part of a set of proposed changes to regulations for pharmaceutical development, registration and sales by China’s National Medical Products Administration in early May. The regulator sought public feedback on the proposal for a month and the consultation period ended in early June.

Before Wednesday’s slide, China’s internet health companies have been picking up amid a broad recovery in the country’s tech stocks. Excluding Wednesday losses, Alibaba Health were about 39% higher so far in June, while JD Health and Ping An were respectively up 26% and 7.6% this month.

Write to Yifan Wang at [email protected]

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