China Tech Stocks Extend Gains On Meituan Fine Relief

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by Tyler Durden
Monday, Oct 11, 2021 - 12:45 PM

Chinese technology stocks continued their rebound Monday after fears of CCP's crackdown on its most prominent tech giants abate after food delivery company Meituan was slapped with a smaller-than-expected anti-trust fine.

Meituan was hit with 3.44 billion yuan ($533 million) over its alleged "monopolistic" practices in the food delivery industry last Friday. The anti-trust probe began in April - might be officially "resolved" according to the Party, was said to be equivalent to about 3% of Meituan's total domestic revenue of 114.7 billion yuan ($17.8 billion last year, per China's State Administration for Market Regulation, China's leading anti-trust watchdog.

"Meituan's better-than-feared anti-trust 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," Kanterman said. 

This year, Beijing has gone on an epic regulatory blitz as the government seeks to rein in tech billionaires and align their business models to fit President Xi Jinping's "common prosperity" campaign. 

Hong Kong's Hang Seng Tech Index jumped 3% on the third day of gains after finding double bottom support around 6,000 yuan for the second time since August. The index has fallen well over 60% since Beijing began its crackdown on the tech industry earlier this year. Meituan was one of the top performers on the index, rising 8.4%. 

US investors have been waiting to buy the proverbial "BTFD" in Chinese tech stocks, but every bounce has been sold since February. Now there's a bid for tech stocks, and the latest from Monday morning shows some of the top names are up 2% to 5%. Alibaba rose 5%, and Baidu are up around 2%. In the last three days, the Meituan news and President Joe Biden's plan to meet Xi Jinping has brought investors back into beaten-down Chinese tech. 

Double bottom spotted in KraneShares CSI China Internet ETF. 

Some of the buying momentum came from a recent SEC filing revealing US billionaire investor Charlie Munger doubled down on his Alibaba position in the third quarter.

Meanwhile, Kyle Rodda, market analyst at IG Markets, said the "market is very, very concerned about the growth outlook - these sort of rallies that appear almost inexplicable are symptomatic of the market still trying to piece together all pieces of the puzzle.

This seems like a relief rally in Chinese tech stocks as some overhang of regulatory crackdowns subsides.