October 27, 2021

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China Tech Stocks Extend Rebound on Relief Over Meituan Fine

(Bloomberg) — Chinese technology stocks continued their rebound on Monday after Beijing slapped a smaller-than-expected fine on food delivery giant Meituan.

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Hong Kong’s Hang Seng Tech Index jumped 3.2% in a third day of gains after closing on Wednesday at its lowest level since last year’s official launch. Meituan rose 8.4%, making it one of the top performers on the gauge. The stock also boosted the broader Hang Seng Index, which gained 2%.

READ: China Fines Meituan $530 Million in End to Antitrust Probe

“Meituan’s better-than-feared antitrust penalty may be leading investors to rethink the severity of punishments that may follow from China’s tech crackdown,” said Bloomberg Intelligence analyst Matthew Kanterman. “However, uncertainty remains and may continue to keep sector valuations depressed for several more months until there’s greater clarity on the situation.”

The tech sector has been in Beijing’s crosshairs for almost a year as the government seeks to rein in tech billionaires and bend their business models to fit President Xi Jinping’s “common prosperity” campaign. The rise in global bond yields has added to the woes for tech shares, reviving concerns about their valuations.

The tech rebound gained some support last week with news that U.S. President Joe Biden was planning to meet with Xi before the end of the year.

Among other tech stocks that advanced on Monday, JD Health International Inc. surged 8.4% while Alibaba Group Holding Ltd. climbed 7.9%, the most since Aug. 24. Alibaba got an extra boost last week by a report that Charlie Munger’s Daily Journal Corp. had increased its stake by 83% last quarter.

“The momentum continues in buying Alibaba after Munger,” said Steven Leung, executive director at UOB Kay Hian in Hong Kong.

While the sentiment on Monday was positive, the tech gauge remains more than 40% below its February peak and the sector’s outlook is still clouded by the government’s crackdown.

(Updates with latest prices.)

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