- Teaching firms likely to concentrate on further education provisions: analysts
- China’s education industry sub-index plunged as much as 15%
Battered by a regulatory crackdown, China’s multi-billion dollar private tutoring sector could seek to separate its business segments and bulk up non-academic tutoring as it tries to soften the blow on its operations, analysts said on Monday.
Shares in Hong Kong and US-listed education firms such as New Oriental Education & Technology Group, TAL Education Group and Gaotu Techedu fell sharply for the second straight session on Monday after China barred for-profit tutoring in core school subjects.
While the firms said they expected the new rules to have a material impact on their after-school tutoring services, some analysts expect some of the largest education providers to take steps to mitigate the impact on their businesses.
“Tutoring companies likely have to dispose of K-9 academic tutoring businesses,” China Renaissance Securities analyst Don Lau said in a note. K-9 refers to the final compulsory year of school when exams are taken at the age of 16.
Mark Haefele, chief investment officer at UBS Global Wealth Management, noted that implementation of previous regulations has “often not taken the strictest form” and said listed after-school tutoring firms may look to spin off their school curriculum-based businesses and focus on other areas to avoid delisting.
Under the new rules, all institutions offering tutoring on the school curriculum will be registered as non-profit organisations, according to an official document.
China’s education industry sub-index plunged as much as 15% from Thursday’s close.
Morningstar Equity Research said in a report that it believed “both New Oriental and TAL would need to adjust their K-12 academic businesses and likely spin off the non-profit mandatory education businesses in the longer term – while keeping high schools and other business such as overseas test preparation, adult English and general English.”
It expects both providers to invest in non-academic tutoring such as art, computer coding, sport, music, and other extra curricular programmes to keep their companies to remain listed.
Reporting by Reuters
Also on AF: China’s New Private Tutoring Rules Put Billions of Dollars at Risk
