Investors in Hong Kong’s stock market are rapidly losing their fear of President Xi Jinping’s regulatory crackdowns.
The Hang Seng China Enterprises Index has rallied 10% since closing at a five-year low on October 6, the best performance among major global benchmarks tracked by Bloomberg. Alibaba Group Holding Ltd. has provided the second-biggest support to the gauge with a 24% surge this month. That includes a 6.7% jump on Wednesday after reports that founder Jack Ma has traveled abroad for the first time in a year.
There’s a growing consensus among analysts and traders that Xi’s campaigns to rein in dominant industry players has turned China’s beaten-down offshore stocks into bargains. UBS Group AG raised its rating on the nation’s shares to overweight from underweight, saying tighter economic policy and regulatory concerns are priced in. That followed a report by Fidelity International Ltd. earlier this month that Chinese stocks offered “deep value opportunities.”
“It’s time to accumulate more technology stocks,” said Jackson Wong, asset management director at Amber Hill Capital Ltd. “It’s getting clearer and clearer that the worst of Beijing’s crackdowns are behind us, in particular in the technology sector as they were the first to suffer.”
Chinese stocks were among the world’s worst performing in the third quarter as Xi took aim at everything from gaming to after-school tutoring and property. Slowing economic growth and China Evergrande Group’s liquidity crisis added to concern. The selloff was so brutal it made the MSCI China Index lag a gauge of global stocks by the most in 20 years.
October has seen a sharp turnaround. Beijing’s smaller-than-expected fine on food delivery giant Meituan was taken as a positive development. A South China Morning Post report that Ma has traveled to Europe suggests an improvement in his relationship with Beijing, while Xi’s pledge to support development of key technologies raised investor hopes that the authorities may slow their assault on tech firms. There are also signs the government will step up efforts to limit the fallout from Evergrande’s liquidity crisis.
The Hang Seng China gauge closed up 1.5% in Hong Kong at the highest in almost six weeks, while the Hang Seng Index was up 1.4%. Alibaba Health Information Technology Ltd. surged 13%.
The crackdown began almost a year ago when officials shocked global investors by pulling the initial public offering of Ma’s fintech giant Ant Group Co. Ma, who typically kept a prominent profile, largely disappeared from public view in the months that followed. The subsequent rout wiped out almost $460 billion in value from Alibaba’s shares.