(Bloomberg) — There are growing signs the tide is turning for Chinese technology shares after a years-long crackdown that wiped out as much as three quarters of their market value.
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A gauge of mainland tech stocks listed in Hong Kong advanced for a third day following rare praise from the nation’s top economic planner, and news that government officials had met with six of the largest companies in the sector last week.
The National Development and Reform Commission in a statement Wednesday commended enterprises such as Tencent Holdings Ltd., Meituan and Alibaba Group Holding Ltd. for supporting the nation’s technological innovation with increased investment. That was after regulators last week levied fines on fintech arms backed by Tencent and Alibaba, a move seen as marking the end of the official clampdown.
The reform commission’s praise of tech platforms “helped aid the overall sentiment,” said Vey-Sern Ling, managing director at Union Bancaire Privee in Singapore. The rally is also “probably just a carry over from the positive sentiment over the weekend of Ant and Tenpay’s fines,” he said.
The recent developments are being taken as a sign Beijing is finally switching to a more supportive stance toward the private sector after the crackdown that also caught up areas such as gaming and education. The suspension of Ant’s public listing in November 2020 was deemed as the start of President Xi Jinping’s campaign to rein in the technology sector. That overhang was finally removed when regulators imposed fines of more than $1 billion in fines on Ant Group and Tencent last week.
Hang Seng Tech Index constituents have lost a combined $2 trillion in market capitalization since the gauge topped out in February 2021. The index outperformed the broader market between October and January amid reopening optimism, before sluggish macro economic data derailed its recovery.
The best-performing stocks Wednesday included video-streaming-platform operator Bilibili Inc., which jumped as much as 9.2%, and Kuaishou Technology, which gained as much as 5.8%. The Hang Seng Tech Index rose 2%, but is still down more than 60% from its high in February 2021.
Whether the current rally is sustainable remains uncertain, as many investors remain skeptical that Beijing has really changed its long-term view of the sector, according to analysts.
“A short-term relief rally is reasonable, but sustainability matters,” said Willer Chen, a senior research analyst at Forsyth Barr Asia Ltd. in Hong Kong, citing longer-term concerns such as negative sentiment toward the Chinese economy. “It’s tough to make a guess on how long it will last.”
–With assistance from Zhu Lin.
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