What happened
Shares of several Chinese tech stocks nudged higher today, as investors grew optimistic that the government's crackdown on the space may be coming to an end. Tech stocks, in general, also rose after a positive inflation report in the U.S.
Shares of the large Chinese tech conglomerate Alibaba Group (BABA 0.59%) traded nearly 2.5% higher as of 10:51 a.m. ET today. Meanwhile, shares of JD.com (JD 6.12%) traded more than 4% higher, while shares of PDD (PDD 2.80%) were up nearly 5%.
So what
It's been a much more difficult year for Chinese tech stocks than the broader tech sector, which has been cruising this year. But investors are getting more bullish on hopes that the Chinese government's regulatory crackdown on the Chinese tech sector is at an end.
Image source: Getty Images.
Today, China's National Development and Reform Commission (NDRC) in a statement struck a much more friendly tone toward China's large tech stocks than it has in the past.
"While obtaining rich returns and improving their core competitiveness through their investments, platform companies have also contributed to technological self-reliance, the real economy and the country's high-quality development," the NDRC said.
The statement comes just days after regulators dealt a $1 billion fine to the Ant Group, part of which is owned by Alibaba, signaling that Ant had made the necessary changes and concessions to get into better standing with regulators.
Also recently, the Chinese government unveiled new policies to help the country's ailing property sector such as pushing out the maturity of loans taken out by developers and giving domestic banks more options and tools to deal with loans under duress.
Now, there are still questions over the direction of China's economy, which investors have called into question, and whether the Chinese government is serious about its support of the nation's tech companies, but for now the market is optimistic.
In other news, new data this morning continued to show that inflation in the U.S. is softening. The Consumer Price Index (CPI), which tracks the prices on a market basket of consumer goods and services, rose 0.2% in June and was only up 3% year over year, which is better than economists had been expecting. Getting inflation under control is key if the Federal Reserve is going to stop hiking interest rates, which has been very detrimental for tech stocks.
What now
It's always hard to tell just how serious the Chinese government is when it comes to supporting big tech companies in the country, but the fine to Ant and statements from the NDRC are certainly encouraging.
What might end up being more important is how China's economy performs in the back half of the year. After a promising first quarter, investors are now concerned that the economic rally is not sustainable, given slowing factory activity, high youth unemployment, and a continuation of problems in the housing market. However, the government has started to roll out some stimulus measures, which may help the cause.
Ultimately, I continue to think that Alibaba and JD.com will be good long-term investments because of their scale and market opportunities. I'm less interested in PDD right now until more is known about the current spying allegations the company is facing and the implications of those.
