U.S.-Listed Chinese Stocks on Track for Best Month in a Year
(Bloomberg) -- U.S.-listed Chinese stocks are bouncing back from this year’s bruising selloff as investors hunt for bargains in the wake of Beijing’s corporate crackdown.
The Nasdaq Golden Dragon China Index gained 1% on Wednesday, extending its surge in October to 13%, set for its best month since June 2020. The benchmark has been hammered this year amid China’s clampdown that has gone after everything from tech-giants to after-school tutoring firm and is still down about 25% in 2021.
“The regulatory crackdown is coming to an end, probably over the next few months, and the valuations of Chinese stocks are very inexpensive and attractive, especially for tech stocks,” said Tom Masi, portfolio manager at GW&K Investment Management.
Video-streaming company Bilibili Inc. ranks among the top-performers in the index since the start of the month, gaining 25%, while other technology titans including NetEase Inc., JD.com Inc., iQiyi Inc. and Alibaba Group Holding Ltd. are all up at least 18% in October.
More investors are speculating that the worst of Beijing’s changes are over and China’s internet companies are cheap compared with tech stocks elsewhere in the world. At a meeting of Communist Party officials on Monday, Chinese President Xi Jinping said the nation needs to boost innovation in core technologies and step up research, according to the official Xinhua News Agency.
“In recent years, the internet, big data, cloud computing, artificial intelligence, blockchain and other technologies have accelerated their innovation and are increasingly integrated into the entire economy and society,” Xi said.
There are also signs the government will step up efforts to limit the fallout from China Evergrande’s liquidity crisis. In recent days officials from the People’s Bank of China have said they can “contain” the risk from the embattled developer and called the situation “controllable.” Evergrande said Wednesday that it had applied to resume trading of its shares on the Hong Kong Stock Exchange on Oct. 21.
The rapid rebound in U.S.-listed Chinese stocks comes alongside a similar rally by their peers that trade in Hong Kong. The Hang Seng China Enterprises Index has climbed more than 10% since closing at a five-year low on Oct. 6, making it the top performing major global benchmark over that span. Analysts have started to change their tune as well, with UBS Group AG strategists turning bullish on the group saying tighter economic regulation has been priced.
Still, not everyone is confident that the rally has long-term legs. “Investors need to be very, very careful,” said Matt Maley, chief market strategist at Miller Tabak + Co. “They eased off several times in the last year only to come back in a major way,” he added.
©2021 Bloomberg L.P.