Alibaba and Baidu spark a rally in Chinese tech stocks

AThe higher-than-expected profits of libaba Group Holding Ltd. and Baidu Inc. sparked a rally in Chinese tech stocks. U.S. certificates of deposit at both companies rose more than 10% on Thursday after their results were released. This drove the broader Nasdaq Golden Dragon China Index up 7.6%, the 30-stock Hang Seng Tech Index up 3.8%, and the index up 2.9%. Wider Hang Seng.

This rally in Chinese tech stocks suggests that expectations have become too pessimistic in the space and that investor sentiment is changing. In a note to clients, Sanford C. Bernstein analyst Robin Zhu wrote that Alibaba’s results “were better than expected relative to expectations that had turned increasingly negative in recent weeks.”

Meanwhile, The Wall Street Journal reports that Credit Suisse Chief Investment Officer for Greater China Jack Siu said Beijing has signaled the regulatory campaign targeting tech giants and internet platforms must pause. .

Chinese politicians voiced support for a stronger digital economy at a meeting last week with select tech executives. In April, the Communist Party’s Politburo said authorities planned to unveil measures supporting the healthy and normal development of the platform economy.

“The Chinese government much like the United States and other governments has been trying to catch up in regulating a technology industry that has grown at an incredible rate over the past decade,” said Kevin T. Carter, Founder and CIO of EMQQ Global. “I don’t believe the goal was ever to hurt their internet giants in the long term, but rather to do what all governments are trying to do. This meeting can signal that the government feels it has caught up.

Last month, Bloomberg quoted Singapore-based fund manager Straits Investment Holdings Pte Manish Bhargava as saying the Politburo statements “are very bullish for the market,” adding that rising tech stocks “could imply that perhaps be some sort of short-term floor is in place.”

“Valuations and growth have been there for a while. Investors now need a third leg to stand on,” Carter added. “And that’s a positive feeling. These developments are steps in the right direction.

Additionally, Chinese authorities are easing COVID restrictions as cases decline, which could also boost the country’s economy.

This rally in Chinese tech stocks and changing investor sentiment should impact EMQQ Global Emerging Markets Internet & E-Commerce ETF (NYSE Arca: EMQQ), of which more than half of its assets are oriented towards China. By focusing on the Internet and e-commerce in emerging markets, EMQQ seeks to capture the growth and innovation occurring in some of the largest and fastest growing populations in the world.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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