During the latest quarter, SoftBank Group Corp.'s net profit dropped by 40% because it has held off on new investments in the country to see how Beijing copes with its technology sector.

Japan's Vision Fund, which manages a $100 billion fund, is one of the world's most well-known investors in Chinese startups. Since Chinese regulators began investigating some SoftBank investments for anticompetitive practices, consumer protections, and data security, the value of many of these investments has fallen rapidly.

"Until the situation is clear we want to wait and see," Chief Executive Masayoshi Son told a news conference. "In a year or two I believe new rules will create a new situation."

China's regulatory action has destroyed the valuations of the New York-listed companies, underscoring SoftBank's China risk even as it seeks to reduce its reliance on its largest asset, shares of Alibaba Group Holding Ltd. of China. SoftBank's investments in China, which make up about a quarter of its funds, have been impacted.

While the crackdown has affected returns expectations, "our broader thesis in China is unchanged: It's still a large, growing and compelling economic opportunity," said Navneet Govil, the chief financial officer of Vision Fund.

SoftBank’s net profit fell to 761.5 billion Yen, equivalent to $6.9 billion that is 40% lower than the year-earlier figure and a fraction of the record setting January- March quarter, when the company rode booming stock markets to multibillion-dollar gains on its investments. In the latest quarter, the Vision Fund and its $40 billion successor realized $2.6 billion in investment gains; previously, they had earned $58 billion.

Stocks of the group have dropped a third from two-decade highs reached in March despite the company buying back 2.5 trillion Yen a record amount of stock. Stocks of the group have dropped a third from two-decade highs reached in March despite the company buying back 2.5 trillion Yen a record amount of stock.

"Having a large public portfolio introduces volatility but at the same time it allows us to continue to monetise in a very disciplined manner," said Govil.

As a result of sell-side analyst speculation and share price weakness, buyback expectations have been raised.

"Until now we have sold assets and announced a buyback. This time there was no event like that," Son said.

Through its SB NorthStar unit, SoftBank is also investing in publicly traded shares. With stakes in companies worth $13.6 billion at the end of June, Microsoft Corp and Facebook Inc. two companies listed three months earlier, were no longer part of its portfolio.

The unit will shrink as SoftBank prioritises the Vision Fund, Son said.

Image source: Livemint