(Bloomberg) — China’s technology stocks notched up a fourth day of gains on Thursday in a rally that lost some of its steam after regulators stepped up their criticism of the nation’s ride-hailing giants.
Hong Kong’s Hang Seng Tech Index trimmed a rally of as much as 3.2% and closed up 1.6%. Meituan saw its initial 5.6% rally eroded to an advance of just 0.1% after it and 10 other companies were told not to disrupt fair competition or hurt the interests of drivers and passengers.
Investors are wary of President Xi Jinping’s “common prosperity” campaign, even as they hunt for opportunities in stocks that have been spared by regulators. Favorable technical indicators and strong corporate earnings have helped the index bounce back 15% from its Aug. 20 close, following a selloff that wiped $1 trillion from the value of Chinese stocks globally.
“Bottom-fishing sentiment that has fueled the upside move over the past few days seems to be put to the test,” said Jun Rong Yeap, a market strategist at IG Asia in Singapore. “It is difficult to pinpoint an end to the ongoing regulatory reforms from Chinese authorities.”
READ: BlackRock’s Wei Li Waiting on China Regulatory Intensity to Peak
In another sign of investor jitters, Chinese traders were net sellers of Hong Kong-listed shares by the close on Thursday — for the seventh straight day — reversing inflows seen during the morning.
Proposed reforms to medical services pricing on Wednesday sent pharmaceutical shares tumbling in a wider market that pushed higher.
This followed a flurry of activity earlier including a vow to step up tax enforcement, a top court ruling against labor abuses in the private sector and a government denouncement of excesses in “fan culture.”
READ: Xi’s Crackdown Keeps Strategists Wary of China Tech Stock Bounce
Yet others have expressed confidence that the market may have passed its low point.
“We think the market has mostly priced in the regulatory adjustment for the online media space,” Felix Liu, China Internet analyst at UBS Securities Co., said in a note. “We think market sentiment could bottom out from here and that stocks with solid fundamentals look attractive.”
That’s a view also supported by the return to the market of influential funds like Cathie Wood’s Ark Investment Management.
Amundi SA said in a note that it retains a long-term positive call on China and believes that the recent weakness “has opened up interesting opportunities.” These include sectors like clean energy-related stocks that are insulated from negative changes in regulation.
(Updates with closing levels)
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