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Alibaba, Baidu earnings spark rally in Chinese tech stocks

Alibaba Group Holding Ltd.’s Earnings Above Expectations and Baidu Inc. sparked a rally in Chinese tech stocks. U.S. certificates of deposit at both companies rose more than 10% on Thursday after their results were released. This drove the broader Nasdaq Golden Dragon China Index up 7.6%, the 30-stock Hang Seng Tech Index up 3.8%, and the index up 2.9%. Wider Hang Seng.

This rally in Chinese tech stocks suggests that expectations have become too pessimistic in the space and that investor sentiment is changing. In a note to clients, Sanford C. Bernstein analyst Robin Zhu wrote that Alibaba’s results “were better than expected relative to expectations that had turned increasingly negative in recent weeks.”

During this time, the the wall street journal reports that Credit Suisse Chief Investment Officer for Greater China Jack Siu said Beijing has signaled that the regulatory campaign targeting tech giants and internet platforms must pause.

Chinese politicians voiced support for a stronger digital economy at a meeting last week with select tech executives. In April, the Communist Party Politburo said authorities planned to unveil measures the healthy and normal development of the platform economy.

“The Chinese government – like the United States and other governments – has been trying to catch up in regulating a technology sector that has grown at an incredible rate over the past decade,” said Kevin T. Carter, Founder and CIO of EMQQ Global. “I don’t believe the goal was ever to hurt their internet giants in the long term, but rather to do what all governments are trying to do. This meeting can signal that the government feels it has caught up.

Last month, Bloomberg Singapore-based fund manager Straits Investment Holdings Pte Manish Bhargava said the Politburo statements “are very bullish for the market,” adding that the rise in tech stocks “could imply that some kind of near-term bottom may be in place”.

“Valuations and growth have been there for a while. Investors now need a third leg to stand on,” Carter added. “And that’s a positive feeling. These developments are steps in the right direction.

Moreover, the Chinese authorities are relaxation covid restrictions as cases decline, which could also boost the country’s economy.

This rally in Chinese tech stocks and changing investor sentiment should have an impact EMQQ global Emerging markets Internet and e-commerce ETFs (EMQQ B-), of which more than half of its assets are oriented towards China. By focusing on the Internet and e-commerce in emerging markets, EMQQ seeks to capture the growth and innovation occurring in some of the largest and fastest growing populations in the world.

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