China’s tech stocks are both a buy and a sell!

There’s a lot of renewed belief that the sky has cleared for Chinese technology companies, and that now’s a good time to jump back into one of the most lucrative investment categories of the past decade. There are also plenty of reasons to remain skeptical. So the choice comes down to investors believing in climate change, though not in the traditional sense.
Some note as the turnaround point, the day the Politburo called for regulators to act in alignment and support the platform economy — a term referring to internet companies that offer multiple services. But indices heavily weighted toward Chinese tech names, like the MSCI China index, have largely moved sideways since then. The CSI 300 index, which only tracks China-listed stocks and leans more toward financials, industrials and consumer staples, has climbed, albeit only a little.
Excitement built earlier this month after the Wall Street Journal reported that Chinese regulators were preparing to wrap up their investigation into ride-hailing company Didi Global Inc. and make its main apps available for download again. The stock surged as much as 68% in a single day. Didi, which like Uber Technologies Inc and Lyft Inc relies on its Android and iOS software to connect with customers and drivers, had a halt placed on 26 of its apps when Beijing decided last year that the company’s data-sharing warranted a closer look.
As predicted, that national security review resulted in Didi seeking a delisting from New York not long after its debut. Any investor surprised by recent news that the curbs on its app were about to be lifted just wasn’t paying attention. The company literally said as much when it implored shareholders.
Last month, investors heeded that call and the shares will no longer trade on the New York Stock Exchange. Beijing ending its app store ban was the next logical step. Ironically, the shares barely budged when the actual vote was announced, the true catalyst for officials to ease up. Clearly optimists — who rallied around the news of an easing — and pessimists — who ignored the earlier shareholder vote — both took something away from this development. Then there’s Ant Group Co, the financial affiliate of Alibaba Group Holding Ltd which had its IPO nixed at the last minute following Jack Ma’s now-infamous October 2020 speech criticising regulators.
A revival of Ant’s public listing would be the closest we’re likely to get to forgiveness for Ma and Alibaba, and would rightfully be viewed as a signal from Beijing that the crackdown is over. Bloomberg News reported that the China Securities Regulatory Commission was weighing allowing a list to be revived, though both the CSRC and Ant later said they have no such plans. Even the carefully worded responses, a kind of non-denial denial, could be taken by bulls and bears as the sign they seek.

—Bloomberg