Bloomberg Thu, Jun 09, 2022
US-listed Chinese stocks rallied for a third day after China approved a second batch of video games this year, marking a further softening in the country’s stance toward internet firms.
The Nasdaq Golden Dragon China Index gained 5.7% on Wednesday, hitting a three-month high and extending an 8.9% rally across the previous two sessions. Tech giant Alibaba Group Holding Ltd. was among the top gainers, advancing 15% to its highest since early February. Live-streaming platform Bilibili Inc. jumped 6%, while e-commerce firm JD.com rose 7.7%.
After a tech crackdown that ensnared sectors from e-commerce to fintech and even online education, Beijing has taken a more lenient line, introducing policies aimed at propping up the group and the Chinese economy. The Wall Street Journal reported that regulators are preparing to wrap up their investigation into Didi Global Inc. and restore the ride-hailing giant’s main apps to mobile stores as soon as this week.
“The worst is behind us in terms of earnings and regulations,” said Adam Montanaro, investment director at Abrdn. The gaming approvals are a continuation of “the government’s more supportive tones and gestures toward the internet economy,” he said.
Bruised Chinese internet stocks have emerged as a bright spot at a time when US peers are still gripped by prospects of higher interest rates. Easing of lockdown measures in major cities, together with a string of better-than-expected earnings, are also boosting risk sentiment.
That said, Beijing’s persistence with its Covid Zero strategy remains a source of concern, and some bearish strategists, including DZ Bank AG’s Manuel Muehl, view the current optimism as premature.
The gains have trimmed the Nasdaq Golden Dragon China Index’s drop this year to 11%, beating the Nasdaq 100’s 23% slump. While the basket has topped a key moving average, it’s still down more than 60% from its peak set in February last year.