Chinese tech giants are witnessing a dream start to the year.
The Nasdaq Golden Dragon China Index — a popular index tracking Chinese firms listed in the United States — soared 13% in the first two trading days of 2023, marking its best start to a year on record, according to data compiled by Refinitiv dating back to 2003.
US-listed shares of Chinese e-commerce firms Alibaba (BABA), JD.com (JD) and Pinduoduo (PDD) added $53 billion to their combined market value on Wednesday. So far this week, their market cap has increased by nearly $70 billion.
In contrast, major US stock indexes were mostly flat in the past two sessions.
The surge comes as investors are feeling optimistic that Chinese regulators will go easy on tech firms this year and also introduce measures to boost growth in the industry.
The Hong Kong-listed stock of Alibaba staged a sharp rebound as well. It’s up 12% so far this year, rebounding nearly 70% from its record low in late October.
The change in sentiment comes after Jack Ma’s Ant Group won a key approval for capital expansion of its consumer finance unit. Ant Group is a fintech affiliate of Alibaba, both of which were founded by Ma.
“Approval for Ant Group to expand its consumer finance business marked another positive step in easing regulatory risks,” said Yeap Jun Rong, a market analyst at IG Group.
Chinese tech companies have faced a sweeping regulatory crackdown since late 2020, which drove investors away. In 2021 and 2022, the Nasdaq Golden Dragon China Index plummeted 46% and 25% respectively.
Ant’s fundraising plan
The China Banking and Insurance Regulatory Commission has approved an application by Ant’s consumer finance unit to expand its registered capital from $1.2 billion to $2.7 billion, according to a government notice issued late last week.
After the fund raise, Ant will control half of its key consumer finance unit, while an entity controlled by the Hangzhou city government will own a 10% stake. Hangzhou is where Alibaba and Ant have been headquartered since their inceptions.
The approval is a big step in Ant’s restructuring, which is driven by regulators and has been going for more than two years. It also marks a crucial step in its longtime plan to go public.
In November 2020, regulators abruptly pulled the plug on Ant’s $37 billion IPO, which was touted as the largest in history. A month later, they ordered Ant to overhaul its business.
The latest approval of Ant’s capital expansion plans has fueled hopes that Chinese authorities want to improve ties with the private sector, as they turn their focus to economic growth this year.
Last month, Chinese leaders pledged at a key meeting that they would focus on boosting growth in 2023, after the zero-Covid policy battered the economy and sparked public discontent last year.
“Softer calls for regulatory reforms and greater emphasis on economic growth” have been in focus over the past months, said Yeap.