What happened
Shares of several Chinese stocks were moving higher Wednesday morning thanks to some positive news on the regulatory front and continued bullishness around the broader sector.
As of 11:09 a.m. ET, shares of e-commerce company Baozun (BZUN 4.31%) traded more than 7% higher, shares of social media company Hello Group (MOMO 0.70%) traded nearly 8% higher, and shares of streaming company HUYA (HUYA 4.06%) were up by more than 8.5%.
So what
Chinese stocks rallied in January; Hong Kong's benchmark Hang Seng Index is up close to 10% so far this year. Those stocks have been buoyed by supportive economic measures from the Chinese government and the wider reopening of that nation's economy following the relaxation of its restrictive "zero COVID" policies.
Image source: Getty Images.
Many experts and analysts think this could be just the beginning of the rally, as consumers begin saving and the Chinese government continues to lend a hand.
"We do expect, in this year, that Chinese policymakers have a lot of room to further support the economy," Min Chen of Somerset Capital said during an interview on CNBC. After laying out some of the measures that have already been taken, he added: "This means that China has a good chance to stand out as a fast growing economy this year amid a global slowing down economy."
There were further signs of regulatory easing Wednesday after the China Securities Regulatory Commission (CSRC) issued a draft proposal for rules that would make it easier for Chinese companies to receive approval to go public.
Currently, Chinese companies really need the green light from the CSRC to go public, and regulators have more control over listing prices. Under this new registration-based system, Chinese companies will be able to go public more easily, so long as they conform to a more uniform set of policies.
Bosera Asset Management called the news "a milestone event in China's capital markets." The move should make it easier for smaller Chinese companies to go public, and could help explain why smaller stocks like Baozun, Hello Group, and HUYA are rallying Wednesday.
While I didn't see a ton of company-specific news related to these names, Baozun announced Wednesday morning that it has received the necessary regulatory approvals and completed its acquisition of Gap Greater China, the Chinese subsidiary of U.S. apparel company Gap.
"This is an important milestone that accelerates our evolution into a technology-driven, omni-channel commerce player in China," Baozun CEO Vincent Qiu said in a statement. "With a core team of functional experts who understand both Chinese consumers and local market dynamics, we look forward to progressing our China-for-China strategy and digitalization initiatives for Gap Greater China."
Now what
All of this news about China's economic reopening and its government's more supportive regulatory approach certainly looks good for Chinese stocks, and could give investors confidence, especially if they feel like the Chinese government is not going to suddenly reverse course.
I do tend to prefer to invest in larger Chinese companies that already have the scale to take advantage of the massive Chinese market, so long as they can stay out of the crosshairs of regulators, but Baozun certainly looks intriguing. The company will benefit from the faster-than-expected reopening of the Chinese economy, and its recently approved acquisition of Gap Greater China shows it is likely in good standing with Chinese regulators.
