Big-name Chinese tech stocks have put on a second-straight day of gains on the Hong Kong bourse, giving weary investors new hope that the worst of the selling is over.
Alibaba’s (NASDAQ: BABA, HKG: 9988) Hong Kong-listed stock is up 6.5% for the week to the close of trading on Tuesday in Hong Kong, while fellow Chinese e-commerce giant, JD.com (NASDAQ: JD, HKG: 9618) has risen 8%.
More broadly over the past month, the NASDAQ Golden Dragon China Index, which tracks NASDAQ-listed stocks that do business predominately in China, has risen 28.5%.
China’s CSI 300 index, which tracks the the top 300 stocks listed on the Shanghai and Shenzhen stock exchanges, is up 7.7%
The renewed interest in Chinese tech follows state media reports stating that Chinese regulators are concluding their cybersecurity investigations into ride sharing giant DIDI.
“Just as Alibaba’s Ant Financial IPO debacle marked the beginning of Beijing’s unprecedented regulation of technology firms in China, the end of DIDI’s probe could mark the beginning of regulatory normalcy that kickstarts a new era of growth,” said Stansberry analyst, Brian Tycangco.
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Downside risks for Chinese stocks priced-in
Christopher Ching, an analyst at MA Financial Group says risks associated with the Chinese stock market now seem to be well priced-in following a bear market that has spanned more than 12 months.
“The CSI 300 is now trading at 11.7x forward PE; one standard deviation below its three-year historical average,” said Ching.
“With the excessive selloff in the market partly driven by non-economic factors, our investment team is starting to deploy more capital into high-quality companies in oversold sectors.”