New York March 16 2022: U.S.-listed Chinese stocks soared the most since at least 2001 after Beijing vowed to keep its stock market stable, halting a sharp selloff that saw the shares erase over $200 billion in value in just three days.
The Nasdaq Golden Dragon China Index jumped as much as 28% Wednesday after officials promised to ease a regulatory crackdown and support property and technology companies. Alibaba Group Holding Ltd. rallied as much as 28% in its biggest intraday gain since September 2014, while JD.com Inc. and Didi Global Inc. each gained at least 30%.
The rally in American depository receipts, together with the biggest-ever overnight gain in the Hang Seng Tech Index, helped fuel a surge in the S&P 500 Index and Nasdaq 100 Wednesday, which also benefited from some signs of progress in peace talks with Ukraine.
The turnaround comes after investors have been split on the fate of Chinese stocks. While analysts at JPMorgan Chase & Co. said that some Chinese Internet names have turned “uninvestable” in the short term, others said the recent selloff was overdone.
“What we saw today is the regulatory risk premiums going away,” said Olivier d’Assier, head of Asia Pacific applied research at Qontigo. “Regulatory risk was the biggest worry for investors and they are right now breathing a sigh of relief on Beijing’s speech.”
“However, it still leaves the geopolitical risk out there, that’s something that has to play out but that usually takes a little bit longer,” he said.
Shares in live-streaming platform operator Bilibili Inc., which said on Wednesday it plans to pursue conversion to a dual-primary listing on the Hong Kong Stock Exchange, jumped as much as 45%. China-linked exchange-traded funds soared too, with the KraneShares CSI China Internet Fund gaining 30% and the Invesco China Technology ETF up 21%.
“We see some long-only funds starting to search for bargains, and it’s very distinct over those companies who can do a dual listing and those who cannot,” said Sean Darby, chief global equity strategist at Jefferies.
Under Pressure
Chinese stocks in the U.S. saw renewed weakness last week after the U.S. Securities and Exchange Commission identified five Chinese companies that could be subject to delisting. The prospect of sanctions for China amid Beijing’s relationship with Russia and a lockdown in tech hub Shenzhen have also weighed on sentiment.
Reach more: China Investors Need More Than Words to Find Faith in Markets
“There were plenty of encouraging messages, but markets will be looking for action such as rate cuts, more fiscal spending, and easing regulations, to follow words otherwise the selling pressure may resume,” Mitul Kotecha, chief emerging Asia and Europe strategist at TD Securities, said.
Despite Wednesday’s historic rally, the Nasdaq Golden Dragon China Index is still down more than 60% since it’s peak in February 2021. Shares of tech giants are also closer to their lows with Alibaba down about 70% from its high last year and Baidu Inc. about 60% lower.
For Marvin Chen, a strategist at Bloomberg Intelligence, actions will also speak louder than words.
“We do have a solid base for a U-shaped recovery, supported by the policy shift and valuations,” he said. “For a next leg, we need to see policy makers follow through on easing measures and supporting growth going forward.”
Separately, Reuters reported today that Alibaba and Tencent Holdings Ltd. are preparing to cut tens of thousands of jobs combined in 2022 amid China’s regulatory crackdown.
