Business Maverick: The Worst May Be Over for China Stocks With Tech Probe’s End in Sight

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When it comes to inflection points for Chinese stocks, there’s rarely been this much anticipation.

state may at last be getting what they wanted. American depositary receipts in Didi Global Inc. traded as much as 68% higher in New York trading Monday after the Wall Street Journal reported regulators could effectively end a yearlong probe into its business as soon as this week. The Hang Seng Tech Index closed 4.6% higher in Hong Kong, a two-month high, while the Nasdaq Golden Dragon China Index jumped as much as 7.8%.

The news added to a more upbeat tone around Chinese assets, where the prospect of a sizable rebound is too good to pass up for many investors. Policy makers in Beijing appear to be delivering on pledges made in March to support the economy, prevent a downward spiral in the housing market and wrap up a crushing crackdown on tech companies. The offshore yuan added 0.2% by 9:45 p.m. in Hong Kong and was headed for its highest closing level in five weeks.

“I think we are bumping along the bottom here,” Chi Lo, senior Asia Pacific investment strategist at BNP Paribas Asset Management, said in a Bloomberg Television interview before the Wall Street Journal report. “When you look at the biggest drag on Chinese equities — which was the regulatory tightening on the tech sector — the worst is over.”

Authorities are taking more conspicuous steps to shore up growth. In the past week alone, Shanghai’s government freed the majority of its residents from a Covid Zero lockdown, while China’s finance ministry and central bank said they would press ahead with policies to offset damage to the economy.

The moves appear to be having the intended effect. The CSI 300 Index of onshore stocks is up 10% since a two-year low in late April, outperforming almost every national benchmark tracked by Bloomberg. Foreign outflows turned to inflows last week for the first time since March, while falling short interest shows speculators are unwinding their most bearish bets.

 

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