For Chinese Tech Stocks, No News Is Good News
Hang Seng Tech Index has clawed back 11% after hitting a trough last week.
2 min
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.
Copyright 2020, Dow Jones & Company, Inc. All Rights Reserved Worldwide. LEARN MORE
This stylish family home combines a classic palette and finishes with a flexible floorplan
Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.
“Only with competition can we become stronger and allow the industry to remain healthy,” Ma said
2 min
Alibaba Group co-founder Jack Ma said competition will make the company stronger and the e-commerce giant needs to trust in the power of market forces and innovation, according to an internal memo to commemorate the company’s 25th anniversary.
“Many of Alibaba’s business face challenges and the possibility of being surpassed, but that’s to be expected as no single company can stay at the top forever in any industry,” Ma said in a letter sent to employees late Tuesday, seen by The Wall Street Journal.
Once a darling of Wall Street and the dominant player in China’s e-commerce industry, the tech giant’s growth has slowed amid a weakening Chinese economy and subdued consumer sentiment. Intensifying competition from homegrown upstarts such as PDD Holdings ’ Pinduoduo e-commerce platform and ByteDance’s short-video app Douyin has also pressured Alibaba’s growth momentum.
“Only with competition can we become stronger and allow the industry to remain healthy,” Ma said.
The letter came after Alibaba recently completed a three-year regulatory process in China.
Chinese regulators said in late August that they have completed their monitoring and evaluation of Alibaba after the company was penalized over monopolistic practices in 2021. Over the past three years, the company has been required to submit self-evaluation compliance reports to market regulators.
Ma reiterated Alibaba’s ambition of being a company that can last 102 years. He urged Alibaba’s employees to not flounder in the midst of challenges and competition.
“The reason we’re Alibaba is because we have idealistic beliefs, we trust the future, believe in the market. We believe that only a company that can create real value for society can keep operating for 102 years,” he said.
Ma himself has kept a low profile since late 2020 when financial affiliate Ant Group called off initial public offerings in Hong Kong and Shanghai that had been on track to raise more than $34 billion.
In a separate internal letter in April, he praised Alibaba’s leadership and its restructuring efforts after the company split the group into six independently run companies.
Alibaba recently completed the conversion of its Hong Kong secondary listing into a primary listing, and on Tuesday was added to a scheme allowing investors in mainland China to trade Hong Kong-listed shares.
Alibaba shares fell 1.2% to 80.60 Hong Kong dollars, or equivalent of US$10.34, by midday Wednesday, after rising 4.2% on Tuesday following the Stock Connect inclusion. The company’s shares are up 6.9% so far this year.
This stylish family home combines a classic palette and finishes with a flexible floorplan
Just 55 minutes from Sydney, make this your creative getaway located in the majestic Hawkesbury region.
