Australia markets closed

    -109.60 (-1.43%)

    -0.0040 (-0.55%)
  • ASX 200

    -108.60 (-1.47%)
  • OIL

    +0.71 (+0.94%)
  • GOLD

    -12.60 (-0.72%)

    -3,211.63 (-5.28%)
  • CMC Crypto 200

    -65.03 (-5.90%)

Chinese tutoring firms could spin-off units, boost non-academic tutoring - analysts

·2-min read
FILE PHOTO: FILE PHOTO: Children leave a school in the Shekou area of Shenzhen

By Abhijith Ganapavaram

(Reuters) - 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 U.S.-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.

(Graphics: Chinese stocks under regulatory fire:

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.

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 programs to keep their companies to remain listed.

(Reporting by Abhijith Ganapavaram in Bengaluru; Editing by Anshuman Daga and Maju Samuel)

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting