Alibaba Leads China Tech Gains as Regulatory Woes Ease Further

(Bloomberg) — Chinese tech stocks jumped as the sector’s outlook improved further following regulator comments that a years-long crackdown is ending.

Most Read from Bloomberg

Alibaba Group Holding Ltd. rallied as much as 8.3% to lead gains on the Hang Seng Tech Index, which rose more than 3% early Monday. The broader market also advanced, with the Hang Sang China Enterprises Index rising as much as 2.5%.

China’s equities have had a strong start to the year, buoyed by bets that pro-growth policies and a reopening of borders will fuel an economic recovery. Comments by Guo Shuqing, party secretary of the People’s Bank of China, that a clampdown on the tech sector is coming to an end gave traders further conviction.

Investor mood has turned more favorable toward Alibaba as founder Jack Ma is ceding controlling rights of Ant Group Co., whose listing was abruptly scuttled in 2020. While a change in corporate control will delay an eventual listing of Ant, it’s in line with authorities’ intention to enhance corporate governance as part of a regulatory overhaul.

“Investors could view this as a major step forward in removing the regulatory overhang since Ant’s IPO failure,” said Willer Chen, senior analyst at Forsyth Barr Asia Ltd. “It’s a positive for Alibaba’s shares and investor sentiment.”

Strategists at Goldman Sachs Group Inc. and Morgan Stanley have upgraded their views on a slew of big tech names, citing a faster-than expected reopening and a normalizing regulatory environment. Goldman added Alibaba to its conviction list as it believes “the worst is behind” after two years of downward earnings revisions, expecting a recovery in advertising revenue.

Story continues

Having borne the brunt of selling over the past two years, the Hang Seng Tech gauge has rallied about 60% since an October low. Risk-on sentiment prevailed across Asia Monday, setting a key MSCI benchmark on track to enter a technical bull market.

READ: Asia Stocks On Track to Enter Bull Market as China Rally Extends

“After the regulatory reset in late 2020, we see early signs of an easing regulatory environment with the government’s support for the private sector,” Morgan Stanley analysts including Gary Yu wrote in a Jan. 8 note. “For the past 1-2 years, Alibaba has been in focus, so we think it could outperform other Chinese Internet stocks as the environment eases.”

–With assistance from Charlotte Yang.

(Updates with latest market prices, additional comment)

Most Read from Bloomberg Businessweek

©2023 Bloomberg L.P.