Chinese tech stocks listed in the U.S. saw significant gains Wednesday morning following the approval of an expanded capital plan for Ant Group by Chinese officials.
American depositary receipt (ADR) shares of Alibaba surged by 13.1%, while JD.com’s stock jumped 14.7%. Meanwhile, shares of Baidu increased by 10.6%, and NetEase and Trip.com saw rises of 8.0% and 6.8%, respectively.
These gains reflect investor optimism regarding a potentially more favorable regulatory climate in China. Ant Group, which had previously had its initial public offering (IPO) plans halted due to regulatory issues, has been permitted to double its registered capital as part of the new plan.
This development, coupled with the easing of zero-Covid policies, is interpreted by some investors as an indication that the Chinese government may support private sector growth in the coming year.
“China has struck a notably accommodating tone in recent months, pivoting away from its stringent COVID controls and dialing back its regulations on previously highly depressed sectors (i.e., property).
The recent Central Economic Work Conference (CEWC) has set government’s priority for 2023 to revive consumption and support the private sector,” Fawne Jiang of Benchmark wrote in a note to clients Wednesday.
ADRs function similarly to common stock but represent a more indirect form of ownership. They allow Chinese shares to be traded in the U.S. without the companies needing to adhere to U.S. accounting regulations, which has raised concerns about potential delisting.
However, last month, the Public Company Accounting Oversight Board (PCAOB), a U.S. accounting watchdog, announced that it had gained access to inspect accounting firms in China and Hong Kong. This development is viewed as a positive step towards reducing the risk of delisting.
