Shares of Chinese online health companies dropped sharply 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.
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