Please ensure Javascript is enabled for purposes of website accessibility

Why DiDi Global, Alibaba, and NetEase Popped Today

By Chris Neiger – Jul 28, 2021 at 3:14PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors were temporarily bullish on Chinese stocks, but it may not last.

What happened 

Shares of DiDi Global (DIDI -1.25%), Alibaba (BABA -3.82%), and NetEase (NTES -1.50%) were all rising today on no company-specific news. All of these China-based companies are likely seeing their share prices jump today after a major sell-off of Chinese tech stocks over the past couple of weeks. 

DiDi's stock was up 9.3%, Alibaba popped 4.9%, and NetEase's share price spiked 12.6% as of 2:15 p.m. EDT. 

So what 

Investors have ditched many Chinese stocks over the past couple of weeks after the Chinese government appeared to tighten its grip on tech companies in the country. Much of the recent concerns started when the Chinese government indicated that DiDi Global, a ridesharing company in China, could face major fines or even the delisting of its stock. 

White line and bar graphs on a blue background.

Image source: Getty Images.

DiDi went public just last month, and its listing came as the Cyberspace Administration of China conducted a cybersecurity review of the company. The decision to go public may have been interpreted as a move to push back against the Chinese government's authority. 

The result led to China threatening fines against DiDi, suspension of part of its operations, or even delisting. This, of course, spooked DiDi investors -- and investors in many other Chinese companies -- and sent its shares tumbling

Additionally, the Chinese government said within the past week that it will begin regulating online tutoring more closely. That caused investors to fear that more regulation could come to other industries as well. 

All of that news came just a few months after Alibaba, an e-commerce giant in China, paid a $2.8 billion antitrust fine to the Chinese government.

But today's share price rebound by DiDi, Alibaba, and NetEase -- an online gaming, e-commerce, and community platform -- indicates that at least some investors are reversing their concerns about Chinese investments. 

Their renewed optimism may have come after some major publications in China tried to calm market fears. Reuters reported that the state-owned Securities Times said today that, "The recent market decline to some extent reflects misinterpretation of policies and a venting of emotion."  

It appears that at least some investors took the commentary to heart and began investing in China-based companies again, helping to push up the share prices of NetEase, Alibaba, and DiDi today.

Now what 

Investors would be wise to remain cautious about investing in China-based techs stocks right now, despite today's gains. The Chinese government appears to be asserting more of its authority over publicly traded companies, and that's likely to make many investors nervous. 

For example, DiDi was restricted from adding new customers and its app was removed from Chinese app stores this month -- two major blows to its business. If the government imposes more restrictions or fines on DiDi -- or does the same to other companies -- then investors can likely expect more share price drops from companies based in China.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alibaba Group Holding Ltd. The Motley Fool recommends NetEase. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Alibaba Group Holding Ltd. Stock Quote
Alibaba Group Holding Ltd.
BABA
$75.50 (-3.82%) $-3.00
NetEase Stock Quote
NetEase
NTES
$65.63 (-1.50%) $-1.00
DiDi Global Inc. Stock Quote
DiDi Global Inc.
DIDI
$2.37 (-1.25%) $0.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.