Chinese online stocks are positioned for short-term gains as Chinese regulators reportedly end their driving investigation.
(Ticker: DIDI) and facilitate regulatory moves that have hit the internet sector.
Chinese stocks are likely to receive some help as the lockdown slows and China’s policymakers release a wave of stimulus measures to try to heal the economy. Some money managers and strategists are still cautious and see long-term challenges to China’s economy and stocks that could keep Chinese stocks volatile and under pressure for the longer term, but soon these sets of good news are likely to lift some of them. the hardest hit stocks.
Indeed, the shares of DiDi, which is set to delete of the New York Stock Exchange, soared nearly 50% to $ 2.71, though only a fraction of its $ 14 public offering price last summer. Similarly, shares of
exchange-traded fund (KWEB) rose nearly 8% on Monday to $ 31.63 although still down 37% over the past year. The wider
ETFs (MCHI) rose 3% to $ 53.52.
The Wall Street Journal reported on Monday that Chinese regulators have completed a year-long investigation into DiDi and planned to allow the company’s mobile phone programs to re-enter. apbutics after they were removed last summer after Beijing opened a cybersecurity investigation shortly after the company made its debut in the United States This caused the shares to fall and eventually led the company to decide to withdraw from the New York Stock Exchange.
The removal of the company and how Beijing handled it are being closely watched due to the continuing delisting of a threat to other Chinese companies as the Securities and Exchange Commission moves forward demanding that companies comply with its control disclosure rules or face removal. of U.S. exchanges if the two companies. countries cannot come to any compromise.
“One possible solution to the overhaul problem would be for Chinese regulators to adhere to U.S. overhaul requirements but would require a small number of firms handling large amounts of consumer data, such as DiDi, to withdraw from U.S. markets,” says Paul Triolo, senior deputy. chairman for China and technology policy leads at global strategic consulting firm Albright Stonebridge Group. After the regulatory backlash faced by DiDi, other companies are realizing that they must comply, allowing China’s Cyberspace Administration to fulfill its goal of designing a clear marker and showing its leading role in data security issues, says Triolo.
Several developments have also offered Chinese stocks a rise, including better than expected quarterly results of
(3690.Hong Kong) Last week, the White House’s decision to cut tariffs on solar imports for two years, and China’s efforts to stimulate the economy through reductions in sales taxes for electric vehicles and a reduction in Covid restrictions in China, says Brendan Ahern, leader. KraneShares investment officer.
Beijing’s efforts to stabilize its economy and market have included officials such as Liu He, emphasizing the importance of the platform economy and announcing a political upheaval in the internet and property sectors and calling for a “quick” resolution on the antitrust and cyber investigations that have plagued investors. The companies most closely watched from a regulatory perspective, says Ahern, include video companies
which rose 9% on Monday, and video game companies
(700.Hong Kong) and
(NTES) which recorded a more muted gain of 2%.
“Relief for DiDi is coming in the broader context of a very weak economy, a growing panic between central leadership and efforts to support employment and markets, ”Says Rory Green, head of China and Asia research at TS Lombard. “I expect similar moves to take place for the rest of 2022. Investors should note that regulatory efforts will eventually return, but only when economic activity stabilizes.”
Trio also sees a ban on the regulatory front, at least until the Fall Party Congress, as Beijing sees its removal as “effective in reaffirming regulatory prerogatives, and companies will be more cautious going forward to curb the behavior that has generated concern among regulators.” technology companies are in line with Xi Jinping’s broader focus on common prosperity and strengthening investment in high-priority areas for Beijing.
But for investors, increased pressure to do what the government needs could limit the profitability of these online companies. keeping some money managers looking for opportunities elsewhere.
Another note of caution: The economy is unlikely to recover as it did after the Wuhan lockdown, when strong demand for its exports and property prosperity offered a boost.
“While we expect a major infrastructure stimulus and continued monetary easing, ‘zero Covid’ and its impact on mobility, confidence, wage growth and credit demand are lowering the multiplication of stimulus efforts, particularly property and credit,” warns Green. “Omicron will take precedence and growth will remain weak. Consumer voluntary related equity benefits will benefit from gradual economic and Covid improvement but profit growth is likely to disappoint.”
Write to Reshma Kapadia at firstname.lastname@example.org