(Bloomberg) — Chinese tech stocks extended a rally into a second day Wednesday, as share buybacks by Xiaomi Corp. and Alibaba Group Holding Ltd. spurred hopes that other tech firms may follow suit.
The Hang Seng Tech Index ended 2.1% higher, with Xiaomi gaining 4.1% and Bilibili Inc.’s 10% advance among the out performing names. The gauge has climbed nearly 40% from its low reached last week but remains down more than 50% from a February 2021 peak.
Tencent Holdings Ltd., JD.com Inc., and Meituan are among firms in the sector which are sitting on huge piles of cash, and some of these companies have been known to launch buybacks after announcing earnings. Meituan is set to report on Friday, while Tencent’s earnings will be released after the close of trading Wednesday.
These bullish bets are helping revive flagging momentum in the broader market, with demand for platform companies also aided by state media reports which have struck a more supportive policy tone. Signs are emerging that Beijing may ease off on an internet crackdown and economists expect the central bank to lower the reserve requirement ratio next quarter.
A front-page editorial piece in the Securities Times on Wednesday said that the government’s “traffic light” mechanism for platform firms may help not only to better regulate the industry but also to “green light” areas that should be supported for development. The government has said it will step up policy support for the economy and capital market, and reiterated a pledge to shore up battered investor confidence.
The Hang Seng China Enterprises Index has climbed 26% from a low this month, while the benchmark CSI 300 Index has rebounded 7%, though the pace of the gains has slowed significantly this week.
Some market watchers caution that any sustained move higher would require further policy support from the authorities, with a lack of follow-through potentially providing investors an excuse to sell into a short-term advance.
Xiaomi’s Results Strong, Firm Can Outperform Peers: Street Wrap
Meanwhile, Chinese regulators are stepping up efforts to ensure that domestic companies remain listed in New York, asking firms with American depositary receipts to prepare for more audit disclosures, according to a Reuters report, which analysts read as constructive.
“The Chinese government is clearly willing to compromise on allowing the Public Company Accounting Oversight Board to inspect audit working papers of some firms without disclosing sensitive data, and the effort looks serious,” wrote Deutsche Bank AG’s Edison Yu in a note.
(Updates prices throughout.)
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