Shares of Tencent Holdings Ltd. have nearly doubled from their recent lows on growing signs that China is preparing to end its crackdown on major tech firms as well as optimism about the country’s reopening.
The online giant has risen about 95% in Hong Kong since Oct 28, as approvals for industry funding and new games have begun to trickle in again. In a major tailwind for the industry, some policymakers have called for a halt to China’s harshest regulatory curbs.
Bejing’s approval for billionaire Jack Ma’s Ant Group Co. to raise US$1.5 billion ($1.98 billion) is the clearest indication yet that the government is easing up. The abrupt cancellation of the firm’s initial public offering in 2020 marked the start of China’s regulatory squeeze, which at one point wiped out more than US$2 trillion from the sector’s valuation.
In the latest good news for the China internet industry, ride-hailing firm Didi Global Inc. on Monday said it has secured the green light to resume signing up new users for the first time since regulators removed its main apps from stores in 2021.
The recent gains in Tencent and peers including Alibaba Group Holding Ltd., whose local shares have jumped 85% in a similar span, also reflect broader investor optimism about China’s pro-growth policies and reopening after the pandemic.
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The dramatic rebound in the Hang Seng Tech Index over the past three months indicates that a sector once labelled “uninvestable” is regaining clout in investor portfolios. Tencent has rejoined the club of the world’s ten most valuable companies for the first time in six months.
“For Tencent and China tech generally, valuations still look reasonable even after the rally, as various geopolitical and domestic concerns have eased and the government looks supportive,” said Vey-Sern Ling, managing director at Union Bancaire Privee. “Earnings revisions for the sector should become increasingly positive ahead.”
