Chinese tech stocks rise sharply in last trading session after year of pain

Shares in China’s tech companies surged on the year’s final day of trading following big gains on Wall Street for US-listed Chinese businesses, though the rally was not enough to shake off the gloom after a woeful 2021 for the sector marked by a sweeping regulatory crackdown.

Hong Kong’s Hang Seng index opened more than 2 per cent higher on Friday, while the exchange’s tech index rose more than 4 per cent. China’s CSI 300 of Shanghai- and Shenzhen-listed stocks was up 0.5 per cent.

The rally followed a boost for Wall Street’s MSCI Golden Dragon index of large- and mid-cap Chinese companies, which jumped 9.4 per cent on Thursday, its best one-day performance in more than a decade. The rise was driven by double-digit gains for companies including internet group Tencent, search engine Baidu, video-sharing platform Bilibili and New Oriental Education.

The euphoria defied the broader US market, with the benchmark S&P 500 sliding to close 0.4 per cent down and the tech-heavy Nasdaq slipping 0.2 per cent.

The Golden Dragon index has fallen 42 per cent in 2021, as Xi Jinping’s campaign to rein in the country’s tech leaders and the threat of forced delistings from US capital markets took their toll.

Friday’s gains in Asia were also driven by some of China’s biggest tech companies, with ecommerce group Alibaba rising more than 9 per cent and its rival JD.com climbing 6.2 per cent. NetEase, the gaming company, advanced 5.8 per cent while food delivery group Meituan added 5.4 per cent.

The Hang Seng Property index was up by almost 1 per cent cent on Friday before losing most of its gain, as investors sought reassurance that Beijing would provide further support to help the sector unravel its debts.

Dickie Wong, head of research at Kingston Securities, said the trials of the past year had already been priced in and that market “sentiment was coming back” to the Chinese tech sector. “Internet- and technology-related stocks are now trading at extremely low valuations,” he said. “It’s time for a rebound.”

Wong warned that the Federal Reserve’s expectations that it will raise interest rates at least three times next year could weigh on the Hong Kong dollar in 2022, putting pressure on the city’s equities market.

“But in terms of volatility, it may go back after a shortlived rebound, but I don’t see too much downside in terms of the overall Hong Kong stock market in the first quarter of next year,” he said.

The market enthusiasm came as China reported a slight uptick in manufacturing activity for December despite a property sector slowdown, energy supply woes and coronavirus outbreaks.

The official purchasing managers’ index rose to 50.3, up from 50.1 in November, according to the National Bureau for Statistics, defying analysts’ expectations of a reading of below 50, which would have indicated a contraction.

Friday’s rebound was not enough to erase the Hang Seng’s 2021 losses. The broader index is down 13.4 per cent in 2021 and the Hang Seng Tech index has lost 48 per cent since a February peak.

The share price of Alibaba, which was fined a record $2.8bn for antitrust violations in April, has almost halved, while Meituan has tumbled 21.5 per cent, JD.com has fallen 19.6 per cent and Tencent has shed 19.4 per cent.

Brent crude, the international oil benchmark, fell 1 per cent on Thursday to $78.70 after rising 0.4 per cent the previous day. West Texas Intermediate, the US oil price marker, closed shed 1 per cent down at $76.25.

Elsewhere in the region, Australia’s S&P ASX/200 was down 0.5 per cent. Markets in Japan, South Korea and Taiwan were closed.