(Bloomberg) — China’s tech stocks jumped as the government’s latest batch of new game approvals bolstered bets that the industry’s business outlook is on the mend.
Hong Kong’s Hang Seng Tech Index Index advanced as much as 4.3% early Wednesday, tracking gains in the sector’s American depositary receipts. Bilibili Inc. and Alibaba Group Holding Ltd. led the rally, rising at least 8.3%.
China’s entertainment regulator on Tuesday approved licenses for 60 new games in what is seen as a step towards policy normalization. Beijing’s wide-ranging tech crackdown spread to online gaming last summer when regulators introduced stringent measures to curb addiction.
The gaming approvals coupled with a report this week that China is wrapping up its investigation into Didi Global Inc. have bolstered sentiment after Beijing’s heavy-handed crackdown sent global investors fleeing.
Read More: China Approves More Games in a Step Toward Normalization (1)
Shares of Tencent Holdings Ltd. and NetEase Inc. also rose, even though they were absent from the approval list.
“I think the market is still excited about the potential restore of Didi on Apps stores and feels a bit risk-on sentiment,” said Willer Chen, an analyst at Forsyth Barr Asia Ltd. “The newest batch of gaming license approval, though Tencent and NetEase are not on the list, is also good news.”
A leveling off of Covid flareups from Beijing to Shanghai has also raised hopes that the worst of the recent selloff is over, with the government ramping up efforts to support growth after lockdowns dealt a heavy blow.
Still, whether the market rebound will have staying power remains in doubt. Multiple stimulus pledges by Beijing’s top authorities have so far failed to keep markets higher for long, while China’s strict Covid Zero policy leaves the specter of future lockdowns hanging.
China’s benchmark CSI 300 Index rose as much as 1.1% on Wednesday. Hong Kong’s Hang Seng Index gained 2.3%.
The regulatory overhang for the tech sector will stay for several years, but “when the economy is struggling, the tightenings will take a break and the policy will become more pro-growth,” Winnie Wu, China equity strategist at BofA Securities, said in a Bloomberg TV interview. “So during those times we could see a strong trading rally of the internet sector in general, because they remain to be some of the largest, most liquid stocks that investors are familiar with.”
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