Investors are selling technology stocks over regulatory concerns in a major Asian economy as one of the country’s largest online payments companies is about to go public. China? No, this is South Korea.
Shares of South Korean Internet companies rose last week after the country’s financial regulator said that fintech platforms selling products such as insurance or funds are not only advertisers but also have to obtain financial licenses.
Shares of Kakao, the owner of South Korea’s biggest messaging app, are down 20% since last Monday. Kakaobank is down 17%. The mobile-only bank went public last month and became the country’s most valuable listed financial company. Kakao’s payments arm Kakao Pay is planning an initial public offering in October. Shares of Naver, another Internet giant, are down 10% over the same period.
Foreign investors rushed to exit. According to Goldman Sachs, he sold nearly $1 billion worth of South Korean shares last week. They are probably haunted by the ghost of an action similar to what is happening in China. For example, shares of Chinese e-commerce giant Alibaba have fallen by almost half from their peak last year.
The financial impact of the new fintech regulations should not be huge, but there are concerns that more regulations could come and spread across the Internet sector. Some South Korean politicians have recently expressed concern about alleged anti-competitive practices by Big Tech and the impact on small businesses.
The noise regarding over regulation can go on for some time. South Korea’s legislature will conduct its annual audit in October, when legislators scrutinize the work of government departments. Controversial issues like regulation of big tech can dominate the news cycle. The debate will likely move into March, when the presidential election will be held. Given that the leading candidates are pretty close in the polls, getting tough on big tech could become a popular pitch.
With a very different political system in South Korea, any new regulatory action there is unlikely to be as swift and comprehensive as in China. But tech investors already thoroughly hurt by the crackdown in Beijing should keep a close eye on Seoul as well.
This story has been published without modification to the text from a wire agency feed
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