For Chinese Tech Stocks, No News Is Good News
Hang Seng Tech Index has clawed back 11% after hitting a trough last week.
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Shares in major Chinese technology companies like JD.com Inc. and Meituan jumped Wednesday, adding to a recent rebound that suggests some investors see good value in the sector after a bruising 2021.
Analysts and investors said there was no clear catalyst for the rally in Hong Kong-listed Chinese tech stocks. But they said buyers appeared to be reassessing the sector in the new year, given lower valuations and an apparent lull in new action from Beijing.
After roughly a year under siege, the sector was finally benefiting from a lack of new measures, said Qi Wang, chief executive of MegaTrust Investment (HK).
“The Chinese government now needs to give companies the time to digest and comply with these new rules,” Mr. Wang said.
Meituan and JD.com stock jumped 9% and 11%, respectively, in Hong Kong trading. That helped lift the city’s Hang Seng Tech Index by 5%.
The index, which launched in July 2020, has now recovered nearly 11% since it hit a record closing low last Wednesday, the same day that China’s antitrust watchdog levied small fines on Alibaba Group Holding Ltd., Bilibili Inc., and Tencent Holdings Ltd. The gauge fell by roughly a third last year.
Several small rallies in recent months have petered out, but this rebound could prove more enduring if the slower pace of regulatory action continues, said Chetan Seth, Asia-Pacific equity strategist at Nomura. He added that “the companies themselves are geared to some very exciting long-term investment themes.”
David Chao, global market strategist for Asia-Pacific at Invesco, said his firm had “taken a much more constructive view” on Chinese shares, especially in tech, for this year compared with last year.
As of Tuesday, shares in sector heavyweight Tencent traded at a price of about 24 times expected earnings, data compiled by Refinitiv showed, down from 29 times a year earlier.
Other major gainers on Wednesday included Alibaba, Baidu Inc. and Bilibili, whose Hong Kong-traded shares each rose about 6%. All three are also listed in the U.S.
Some market watchers remain wary. Marcella Chow, global market strategist at J.P. Morgan Asset Management, said the annual meeting of China’s legislature, the National People’s Congress, in March should provide more regulatory certainty.
“Frankly, we are now taking a wait-and-see approach until [there is] more policy clarity on the China tech sector,” Ms. Chow said.
Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication. January 12, 2022.
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