Nandini Roy Choudhury, writer
Brief news
- Following China’s central bank’s stimulus measures, Chinese tech stocks, including Alibaba and Tencent, saw significant gains, with the Hang Seng Tech Index rising nearly 20% this week.
- Alibaba’s shares closed above $100 in the U.S. for the first time since August 2022, while Tencent’s stock surged 49% this year.
- Despite recent gains, Chinese tech equities remain well below their 2021 all-time highs, but investor sentiment is improving.
Detailed news
After China’s central bank announced measures to stimulate the world’s second-largest economy, Chinese tech equities, including beaten-down names like Alibaba, rallied this week, reaching highs not seen in over a year.
The Hang Seng Tech Index in Hong Kong, which encompasses the majority of the major Chinese technology equities, closed at its highest point since early August 2023, with a nearly 6% increase. This week, the index has increased by 20%.
On Thursday, Alibaba closed above $100 per share in the United States for the first time since August of last year, following a 10% increase during the session. The company’s Hong Kong-listed stock closed at 102.50 Hong Kong dollars on Friday, marking its highest close since February 2023, a nearly 5% increase. This week, the shares of the e-commerce behemoth in Hong Kong have increased by approximately 18%.
Tencent, which is the proprietor of WeChat, China’s largest messaging application, and one of the world’s largest gaming companies, closed at 437.80 Hong Kong dollars per share, an increase of nearly 2%. Following a recovery in its core gaming business, Tencent’s stock has surged by approximately 49% this year, resulting in the firm’s highest close in over two and a half years.
In the meantime, Meituan, a food delivery colossus, concluded the session at 164.60 Hong Kong dollars per share, an 8% increase from its previous close in February of last year.
This week, the People’s Bank of China announced a reduction in the minimum quantity of cash that institutions must maintain. Consequently, the market experienced an increase. The central bank announced its intention to provide additional assistance to the property market that is currently experiencing difficulties. This will involve the extension of measures for a period of two years and the reduction of interest rates on existing mortgages.
The intention behind the declaration of these measures is to stimulate the Chinese economy. Before the cutbacks, investors had been cautious about Chinese technology equities such as Alibaba and Meituan, which are susceptible to the economy and consumer demand in China.
Nevertheless, prominent investors have begun to express a positive outlook on Chinese assets. According to billionaire hedge fund founder David Tepper, he increased his investments in Chinese equities, such as Alibaba and Baidu, following the U.S. Federal Reserve’s interest rate reduction this month, as reported by CNBC on Thursday.
This week, shares of Baidu and JD.com also increased.
Despite the most recent increase, Chinese technology equities are still substantially below their all-time highs, which were achieved in 2021.
Source : CNBC News
