China Tech Stocks Rally After Alibaba and Baidu Beat Forecasts

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The surge comes after Internet companies reported better-than-expected results.

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Profits continued on Friday in Hong Kong, where two online behemoths are also listed. The 30-stock Hang Seng Tec Index rose 3.8%, while the broader Hang Seng Index gained 2.9%.

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On Thursday, Alibaba reported higher-than-expected revenue growth of 9% for the quarter ended March, which equated to about $32.2 billion, thanks in large part to growth in its core e-commerce business. Meanwhile, Baidu reported quarterly revenue that was slightly above last year’s level. Those sales, which also beat market consensus, were supported by strong demand for the Chinese search giant’s cloud and artificial-intelligence products.

Sanford C. Bernstein analyst Robin Zhu and colleagues wrote in a note to clients, Alibaba’s results were “better than expected, which turned sharply negative in recent weeks.”

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Jack Siu, chief investment officer at Credit Suisse of Greater China, said sentiment towards Chinese tech stocks is changing, and the latest results were only the trigger for the rally. He said Beijing has given a clear signal that regulatory campaigns aimed at tech giants and Internet platforms are about to come to a halt.

Last week, Chinese politicians spoke of support for a stronger digital economy in a meeting with select tech executives. In April, China’s Politburo—the top policy-making body of the ruling Communist Party—also vowed to wrap up its push to implement policies to support the economy and rectify issues at Internet-platform companies.

Chinese tech stocks have faced incredibly high volatility, said Frank Benzimara, head of Asia equity strategy at Société Générale. He said the increasingly supportive stance of Chinese officials was being offset by the country’s stringent COVID-19 restrictions, which are impacting growth and consumer sentiment.

That means it is too early to say that the tech sector has bottomed out, Mr. Benzimara said. “We are out of the woods when we see some sustainable growth in consumption and the economy,” he said.

While Alibaba’s sales grew higher than expected, the advance still represents the slowest growth rate since the company was listed in New York in 2014. Alibaba did not provide an annual forecast for the current fiscal year, which ends in March 2023, citing near-unpredictability. Covid disruption.

Once China’s most valuable listed company, Alibaba’s Hong Kong-listed shares are still down about 23% this year, giving it a market capitalization of about $250 billion. At its peak in the fall of 2020, Alibaba was worth more than $850 billion.

Baidu’s latest profit took its year-over-year decline to nearly 9%. Hang Seng Tech Index—Including Other Giants Like Tencent Holdings Ltd.

And Meituan—this year is down 26%.

Rebecca Feng at [email protected]

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