The Chinese education market is a major trend in trading right now. With the nation being the initial center of the novel coronavirus pandemic, savvy investors have sought out online education stocks. These stocks were predicted to rise as a result of quarantine, and they lead to some healthy profits. Today, Chinese education stocks are captivating investors again, but not all are gaining.
There are two driving trends behind the big moves. One is in regard to the IPO of Elite Education Group (NASDAQ:EEIQ). The company centers on providing Chinese students studying abroad with aggregated education solutions. The public offering has been a monumental day for the company, as share prices rocketed a whopping 425% as of Friday afternoon.
Other companies have benefitted from the hype behind EEIQ stock. Wah Fu Education (NASDAQ:WAFU) stock and China Liberal Education (NASDAQ:CLEU) stock appear to be riding on EEIQ’s success, seeing gains of 210% and 37%, respectively.
Some Chinese Education Stocks Hit by New State Policies
Not all Chinese education stocks are winners this morning. Another force behind moves in this sector are newly implemented Chinese policies regarding online education.
The Chinese government is putting new restrictions on online education. These restrictions include a ban on online learning for children aged 6 and under. Additionally, they ban advertising web-based learning services on state-owned media platforms.
Among Chinese education stocks, companies like New Oriental Education (NYSE:EDU), Tal Education (NYSE:TAL), and GSX Techedu (NYSE:GSX) have taken the biggest hits. EDU stock has dropped 15%, TAL has fallen 18% and GSX dropped 29% as of this morning.
Why Has This Divergence Occurred?
While it seems fairly arbitrary how these stocks have risen and fallen, the reasoning behind the differing trends is quite simple. The stocks that lost are companies that primarily serve younger children and are more affected by the restrictions than the others. They likely also rely more heavily on advertising.
The fact that Elite Education serves college students rather than young children allowed for a big IPO for EEIQ stock. WAFU and CLEU stocks are benefitting because they serve a similar age group.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article.