Chinese tutoring names Tal Education, New Oriental gain on more positive news on Guangzhou AST regulation

Chinese tutoring companies TAL Education, New Oriental and Gaotu Education gained after the Guangzhou Education Bureau release a draft on after-school tutoring regulation that was somewhat positive.

“The details in the draft are at the more reasonable end, in our view, and are without material new measures,” UBS wrote in a note.

The most important element of the draft regulation was that it didn’t mention any ban on academic AST on school holidays and weekends.

“This is in contrast with the more restrictive measures in the Yuexiu District in Guangzhou, reported by an industry news outlet,” UBS wrote.

The stocks also gained after reports that Chinese authorities have pledged to cut cost of childbirth, parenting and education. The Central Committee of the Communist Party of China and the State Council issued a new policy directive aimed at reducing the cost of childbirth, parenting and education, according to traders, who cited a Bloomberg report.

Tal Education rose 4.1%, New Oriental climbed 4.2% and Gaotu, formerly known as GSX Techedu, gained 1.9%.

Gaotu short interest 24% of float, Tal short interest 3.7% and New Oriental short interest 3.4%.

Today’s gains for the tutoring companies come after the stocks sank late last week on continued fears of more regulation on the industry that could cut margins.

A Daiwa analyst published a note late last week on Chinese education stocks, writing that the Guangzhou education body plans “tough rules” for the after-school tutoring industry, citing a post from Southcn.com on July 14.

Chinese tutoring stocks have plunged in recent months, prompting several downgrades, on fears that the government could institute a ban on after-school tutoring on weekends and holidays. In late May, Chinese President Xi Jinping stressed the need for regulations for both online and offline after-school training institutions.

Author: Josh Fineman, Seeking Alpha