On May 25th, US stocks rebounded strongly, with New Oriental Education & Technology Group up more than 12%, TAL Education Group up more than 8% and Sunlands Technology Group more than 5%. Yesterday, these stocks suffered a sharp fall due to a piece of online news.

On May 24, the media reported that the Education Commission of Haidian District of Beijing was about to issue a "double reduction" policy, which would be clearly defined for out-of-school training institutions by the end of July at the latest. After the implementation of the online "double reduction" policy, out-of-school institutions will face the "three noes"-- no classes during holidays, no listing of subject and quality training institutions, and no publicity by education and training institutions.

Affected by the news, US general education stocks fell sharply last night, with TAL Education Group, New Oriental Education & Technology Group, Gaotu Techedu Inc. and Puxin Ltd all down more than 10 per cent.

At noon today, the Haidian District Education Commission issued a clarification statement saying that the news spread online that "the Beijing Haidian District Education Commission meets and educational institutions are not allowed to start classes during the summer vacation" is not true, and the chat content is personal analysis and speculation, not officially released by the Haidian District Education Commission.

As soon as the news came out, some education stocks in Hong Kong stocks rose in a straight line, which is also the direct reason for the rebound in education stocks in the United States today.

Strict supervision of off-campus teaching and training industry

Recently, there have been frequent policies and rumors in the education industry, reflecting that regulatory action has always been the unresolved "sword of Damocles" in education stocks.

About two weeks ago (May 14), the regulations on the implementation of the Civil Promotion Law were officially issued, marking the elimination of policy doubts in colleges and universities and private schools of senior high school education.The future of off-campus teaching and training industry is still uncertain.

Before the rumor spread, according to a statement issued by the Education Commission of Haidian District, on May 23, the Education Commission of Haidian District organized some training institutions and held a meeting on fund supervision and standardization of running a school. the training institutions' fees, advertising, publicity, capital supervision, contracts, epidemic prevention and control and other work again put forward requirements.

Earlier, on May 21, the Central Deep Reform Commission examined and adopted the opinions on further reducing the burden of homework and out-of-school training of students in compulsory education (abbreviated as "double reduction"). In this opinion, it is stressed that it is necessary to comprehensively standardize the management of out-of-school training institutions, strictly control them, and strictly investigate those institutions that do not meet the qualifications, chaotic management, take advantage of opportunities to accumulate wealth, false propaganda, and collude with schools to make profits.

On May 19, Beijing Haidian Market Supervision and Administration issued the "Tip Book on the key contents of Advertising in the Education and training Industry", which for the first time set strict standards for the delivery of advertisements in the education and training industry. the document makes detailed regulations on the identity of advertisers, advertising spokesmen, advertising language and content, as well as advertising places.

Specifically, this reminder strictly monitors the placement of advertisements on the pipeline from four aspects, and the traditional channels of getting visitors will encounter major challenges.Content to combat trafficking anxiety and false publicity, promises of high scores and other unrealistic content; the release of the object requires that educational institutions must have school qualifications; advertising sites, not allowed to enter primary and secondary schools and kindergartens for publicity.

On May 17, the Shanxi Provincial Department of Education formulated and issued the "Ten measures to promote the physical and Mental Health of Primary and Middle School students" and stopped approving and approving out-of-school discipline training institutions for primary and secondary school students.

In March this year, the Ministry of Education issued the guidance of the Ministry of Education on vigorously promoting the scientific connection between kindergartens and primary schools, requiring relevant departments to seriously investigate and deal with out-of-school training institutions that receive illegal training for preschool children and put them on a blacklist, incorporate blacklist information into the national credit information sharing platform, and implement joint punishments in accordance with relevant regulations.

Punishment followed. In April, four out-of-school education and training institutions, namely, Xueyusi, Gaotu Techedu Inc. classroom, New Oriental Education & Technology Group online and Gao Si, were fined 500000 yuan by the Beijing Market Regulatory Administration for illegal pricing and false publicity. In May, the homework gang and Yuanfudao were fined 2.5 million yuan for false business publicity and deceiving consumers into trading.

Compulsory education training institutionsThe logic of growth may change

Soochow Securities said that the opinion of "double reduction" advocates reducing students' homework burden and out-of-school training burden, which will help to bring a certain degree of cooling to the popular education and training industry from the source, and help to maintain the order of the industry as a whole. so that students, parents, school teachers and training institutions themselves should correctly view the role that out-of-school training institutions should play in children's education, especially out-of-school training at the stage of compulsory education. Promote out-of-school training to return to its correct educational status.

The agency believes that with the landing of "reminders" and "double reductions" and the transmission of their influence in the future.First of all, the K12 teaching and training industry may face stricter supervision, school qualification examination, charge management, capitalization movement and so on.The industry tends to be rational and healthier.。

Among them, for online educationAdvertising will be limited in terms of content and quantity, and the logic of transforming growth may change when you get customers through advertising.This rectification is mainly aimed at the training institutions at the stage of compulsory education, which has little impact on higher education companies and vocational education companies.

Minsheng Securities believes thatIt may become the norm to strengthen the supervision of the extracurricular tutoring market in the future.Tighter regulation in the short term, the industry may experience labor pains. But in the long run, under the premise that the overall selection system remains unchanged, the training demand is still strong. After the tail small and medium-sized institutions are squeezed out, the demand will be concentrated to the head large-scale institutions, which is good for the head leading institutions.

Liu Lin, president of the China Private Education Association, said earlier that with the gradual introduction of the relevant policy documents of "double reduction", the sustainable development of K12 training-related educational institutions and training platforms will be greatly affected, and the space for survival and growth will be compressed. A large amount of investment focused on K12 will have to turn to other tracks of Internet education, thus driving the further restructuring of the development space of the whole industry.

Before the regulatory change in the education industry, large institutions reduced their holdings of education stocks. According to the newly disclosed position report, Hillhouse Capital significantly reduced its holdings in education in the first quarter of 2021, including the clearance of TAL Education Group and education. In addition, Jinglin assets also significantly reduced its holdings of TAL Education Group in that quarter.