Traders flock back to China tech stocks after Premier Li Qiang, top planning body acknowledge sector’s economic role

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by Zhang Shidong at scmp.com

‘No doubt that the regulatory oversight will become more lax in the future’: Shenzhen analyst
Hang Seng Tech Index has surged by 8.6 per cent this week and is heading for its biggest five-day gain this year

In a boost to China’s technology stocksPremier Li Qiang and the country’s top planning body have acknowledged the industry’s importance to economic growth and innovation, leading to optimism that Beijing has switched from a tough crackdown on the sector to a more supportive stance.

The Hang Seng Tech Index has surged by 8.6 per cent this week and is heading for its biggest five-day gain this year, adding almost US$90 billion in market value in the process. Among its biggest constituents, Alibaba Group Holding – this newspaper’s owner – has advanced 10 per cent, Meituan has soared by 13 per cent and JD.com has gained 12 per cent.

The momentum has also spilled over to Chinese stocks trading in the United States, with the Nasdaq Golden Dragon China Index jumping 6.3 per cent for its best weekly performance since March.

“It’s an official recognition of the contributions of the platforms to economic growth, employment and technology development, and there’s no doubt that the regulatory oversight will become more lax in the future,” said Shawn Yang Zixiao, managing director at Lotus Capital Advisors in Shenzhen. “Investors will become more positive about the sector.”

Sentiment around technology stocks, a key sector targeted by Beijing’s drive to curb its unfettered expansion over the past few years, has taken a turn for the better, after Premier Li held a meeting with executives from major platforms including Meituan, JD.com and Douyin on Wednesday, encouraging them to push ahead with innovation to better serve the economy and create more jobs. He also asked for the set up of a more regular communications mechanism with these platforms, the laying out of a more transparent and predictable regulatory framework, and the creation of a market environment with fair competition.

The same day, the National Development and Reform Commission (NDRC) commended the top platforms for their ramped-up investment in hi-tech areas, ranging from chip-making and autonomous driving to green energy.

While it remains to be seen whether the softened rhetoric signals an end to Beijing’s regulatory curbs that started with the scuttling of Ant Group’s initial public offering in 2020 and that have wiped out trillions of dollars in market value, traders believe that one of the key overhangs holding back stocks is dissipating.

“The comments from the NDRC and Premier Li signify that the Chinese authorities are turning to mega-cap internet companies as an instrument to pursue industrial policies, create employment and attempt to tackle choke points in critical technology,” said Redmond Wong, a strategist at Saxo Markets in Hong Kong.

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