The central government is more concerned about "involution" than monopolies | Zeng Yuancang

The State Administration for Market Regulation of China recently took action and launched an investigation into the mainland's large online travel service platform Trip.com (9961) for suspected monopolistic behavior. As a result, Trip.com's stock price fell to a low of HKD 446 on January 15, a drop of 27% compared to its high of HKD 613 on January 13. After a day, on January 16, there was a slight rebound, closing at HKD 466.2. Tencent, Alibaba, and Meituan Once Fell by 80% A few years ago, Tencent (700), Alibaba (9988), Meituan (3690), and other well-known technology online platforms faced similar investigations. As a result, Tencent's stock price fell from HKD 730 to HKD 170, Alibaba from HKD 304 to HKD 55, and Meituan from HKD 460 to HKD 61, with declines ranging from 77% to 87%, which was quite alarming. Therefore, with Trip.com facing an investigation, it is uncertain whether a 27% drop is sufficient. Fortunately, after the investigations and rectifications, Tencent's stock price has rebounded 2.6 times from its low, now only 15% away from its historical high, while Alibaba has also doubled from its low, 45% away from its historical high. Meituan, however, has only rebounded 64% from its low, still 78% away from its historical high. Meituan's Weak Rebound Due to "Involution" These three stocks faced investigations around the same time, with declines between 77% and 87%, showing little difference, but their rebound strengths vary significantly. Meituan is the weakest, which is why Tencent has distributed some of its Meituan shares as dividends to shareholders. Currently, Meituan is no longer under investigation for monopolistic behavior, but it faces strong new competitors, namely Alibaba and JD.com (9618), and the pressure from competition is substantial, which is referred to as "involution." Central Government's Antitrust Efforts Relatively Easier to Handle For the central government, antitrust issues seem easier to manage; they can prohibit these companies from certain behaviors and impose fines. However, "anti-involution" is much more complex. The "involution" in the electric vehicle industry has persisted for some time, and the central government has repeatedly stated that it should not engage in "involution," but the effectiveness has been limited. With overcapacity in enterprises, if they do not reduce prices, they cannot sell their products. Can the central government prohibit price reductions? The result of not reducing prices and not being able to sell products could lead to business closures—who will take responsibility? Among Tencent, Alibaba, and Meituan, which faced antitrust investigations together, Tencent's recovery has been the strongest. The main reason is the personality of Pony Ma, who immediately expressed his absolute willingness to cooperate with central policies after the investigation. Jack Ma of Alibaba needed some time to calm down before making a comeback, but he is indeed a talented individual, and today's Alibaba is once again vibrant. Meituan has been less fortunate, transitioning from facing antitrust investigations to now dealing with "involution" style competition. Trip.com Current Price Worth a Small Speculative Bet It is said that the reason Trip.com is currently under investigation is due to severe "involution" in the national hotel industry, where most hotels rely on Trip.com's online booking services, leading Trip.com to have the ability to force changes to hotel room pricing in the background. Hotels wishing to accept Trip.com's booking services are "forced" to sign agreements allowing Trip.com to alter hotel room pricing. If the rumors are true, the issue should not be significant, as long as Trip.com is willing to cancel these agreements that allow arbitrary changes to hotel prices, the problem should be resolved Today's central government should be more concerned about "involution" than monopolies. From this perspective, the current price of Trip.com is worth a small speculative bet, as the problems faced by Trip.com are not significant. Zeng Yuancang Related articles: Nearly 7% high-yield stocks have value｜Tang Niu Resource stocks ride the wind, another high-yield stock to shout out｜Zeng Yuancang