Jack Ma’s Alibaba, China tech giants are making a comeback post zero Covid

Hong Kong CNN –

Chinese tech giants are witnessing a dream start to the year.

The Nasdaq Golden Dragon China Index – a popular index that tracks Chinese firms listed in the United States – rose 13% in the first two trading days of 2023, marking the best start to a year on record, according to data from compiled by Refinitiv dating back to 2003.

U.S.-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 largely flat over the past two sessions.

The rise comes as investors are feeling optimistic that Chinese regulators will go easy on tech firms this year and also introduce measures to spur growth in the industry.

Shares in Hong Kong-listed Alibaba also made a sharp comeback. It’s up 12% so far this year, recovering nearly 70% from a record low in late October.

The change in sentiment comes after Jack Ma’s Ant Group won key approval for a capital expansion. Ant Group is a fintech subsidiary of Alibaba, both founded by Ma.

“The 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 has scared away investors. In 2021 and 2022, the Nasdaq Golden Dragon China Index fell by 46% and 25% respectively.

The China Banking and Insurance Regulatory Commission has approved a request by Ant to expand its registered capital from $1.2 billion to $2.7 billion, according to a government announcement issued late last week.

After the fundraising, Ant will control half of its main 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 inception.

The approval is a major step in Ant’s restructuring, which is being led by regulators and has been underway for more than two years. It also marks a crucial step in its long-term plan to go public.

In November 2020, regulators abruptly pulled the plug on Ant’s $37 billion IPO, which was billed as the largest in history. A month later, they ordered Ant to repair her business.

Ant’s recent approval of 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 vowed at a key meeting to focus on boosting growth in 2023 after the zero-Covid policy hit the economy and sparked public discontent last year.

“Softer calls for regulatory reform and greater emphasis on economic growth” have been in focus in recent months, Yeap said.