What happened

After rebounding strongly in Tuesday-morning trading, shares of Chinese education stocks have taken a U-turn today.

As of 12:05 p.m. EDT, the following are down:


Image source: Getty Images.

So what

Why is this happening? By now you know the overarching story of Chinas crackdown on for-profit education companies, right? Well, after Chinese regulators passed one -- hopefully -- final law on data privacy Monday, speculators began speculating that this might be the end of Chinas raft of regulations on the tech sector and perhaps the for-profit education sector as well.

As youll recall, I suggested yesterday that investors jumping back into the market and bottom-fishing for cheap education stocks might be jumping the gun a bit -- that the better course of action would be to pause and make certain that no new regulations are coming before determining whether the share price losses these stocks have endured have resulted in true bargain valuations despite the regulations.

But it seems the share prices were just too cheap to resist.

Now what

Unfortunately, last night Bloomberg published a piece warning that yesterdays rally was only a technical rebound.

There are lingering concerns about how far Beijing may push ahead with its clampdown on private enterprise, opines Bloomberg. The torrent of new laws being passed may not itself be past, and the unprecedented regulatory assault by Chinese government against its own countrys companies may not yet be at an end.

Simply put, Cyber security and data protection remain a firm focus for regulators in the short term, and as a result, as one market maven put it, Uncertainty will remain high across the internet and other related sectors and, by extension, toward Chinese equity in general.

Dont say you werent warned.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends TAL Education Group. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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