China Stocks Rebound Amid Attractive Valuations, Regulatory Easing

China stocks such as Alibaba (BABA), (JD) and Baidu (BIDU) are bouncing off bottoms after a yearlong slump, amid attractive valuations and expectations that regulations and policy hurdles have eased.


JD stock, which soared more than 10% Tuesday, is up more than 20% since Jan. 5, touching its 50-day line. Alibaba stock is up 25% since rebounding off its low on Dec. 29. The China e-commerce giant has reclaimed its 50-day line, as has Baidu.

Another, Tencent Holdings (TCEHY,) is up 15% from its lows.

In addition, the Hong Kong’s Hang Seng Tech Index climbed 5% Wednesday.

Investors appear to be warming up to Chinese stocks due to lower valuations and less regulatory action from Beijing, The Wall Street Journal reported.

China Stocks Hammered In 2021

China stocks were hammered in 2021 amid a regulatory crackdown. Alibaba lost around 50% of its market value last year, as it also faced headwinds from concerns of slowing growth. Value on the Hang Seng Tech Index eroded by roughly one-third in 2021.

China authorities, concerned about the growing power of its largest technology companies, this past year have been issuing antitrust and antimonopoly laws. The regulatory tightening started with a trickle, but intensified in terms of its duration, intensity and scope.

It’s not just regulations that are causing trouble for China stocks. Economic fluctuations, supply-chain shortages, the pandemic, weak consumer demand and rising prices of raw materials have all applied pressure.

Alibaba saw its stock tumble after it reported quarterly results in mid-November that missed expectations.

Alibaba stock jumped 4% to close at 137.41 on the stock market today. JD edged down 0.5%, to 76.40. Baidu rose 1.7% to 159.36. And Tencent climbed 3.1% to finish at 62.56.

Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.


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