HONG KONG (Reuters Breakingviews) – Concise insights on global finance in the Covid-19 era.
————————————————-
COUGHING IT UP. Just two months after electronic-cigarette maker Rlx Technology’s $1.4 billion debut in New York, Beijing has quite predictably cracked down further on vaping. Having banned e-cigarettes’ online sales in 2019, on Monday the Ministry of Industry and Information Technology proposed to govern the industry similarly to the tightly state-controlled tobacco sector, citing unspecified “new problems” in current regulations. That could mean special licensing requirements and much higher taxes of up to 65%, instead of the 13% value-added rate companies currently pay.
That might ease some fiscal stress amid Covid-19, but it could also put companies out of business. The news wiped $14 billion off Rlx’s market value overnight, halving its capitalisation. Rival Smoore’s Hong Kong-traded stocks plunged 27% on Tuesday. Given the lack of details, it’s possible markets have overreacted, but Rlx still trades at 81 times forecast earnings even after news. This could be bad for investor health. (By Yawen Chen)
Breakingviews
Reuters Breakingviews is the world’s leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.
Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.