Following the four-day meeting, or "plenum," of the Communist Party's Central Committee, there has been a lot of optimism in Chinese stocks overnight. First, shares in property developers recorded their best two-day gain in six years. Technology stocks moved higher as Beijing is expected to soften regulatory crackdowns.
Take Didi Global Inc., China's leading ride-hailing company, traded as high as $10 in the US premarket, up more than 10% from Wednesday's close of $8.95 as the company is planning to reintroduce its apps on Chinese app stores following a severe regulator crackdown by the Cyberspace Administration of China (CAC).
Didi was targeted by CAC when it ignored requests by regulators to halt its US IPO on June 30. At the time, CAC was conducting a cybersecurity analysis of its data practices. Shortly after its US debut, CAC ordered the company to remove 25 mobile apps from Chinese app stores.
From the IPO, Didi shares have been halved. As Reuters notes, CAC is concluding its data security investigation, and there is a chance shares have bottomed. The company has been working with CAC to ensure its apps abide by China's Personal Information Protection Law. Didi has had to update a user agreement for customers that defines what personal data will be harvested.
Didi has set aside $1.6 billion for upcoming fines that regulators could slap the company with as early as December. Shortly after, its apps are expected to return to Chinese app stores.
President Xi Jinping's 2021 crackdown of tech and other industries have left many companies badly bruised. Hundreds of billions of dollars in market cap were wiped out as investors worldwide shun Chinese stocks due to policy uncertainty.
However, as early as October, we noted the regulatory blitz is ebbing as Alibaba's founder Jack Ma traveled to Europe for the first time since Beijing's crackdown on his tech empire. This week, there was more good news when education stocks jumped on Monday as Beijing would issue a dozen or more licenses to companies to restart after-school tutoring programs. And more news over the last day of expectations the government may be relaxing restrictions on how property developers raise funds.
If the smoke is clearing in China after nearly a year-long crackdown on tech, then it could be time to take at China tech stocks:
"It's time to accumulate more technology stocks," said Jackson Wong, asset management director at Amber Hill Capital Ltd. "It's getting clearer and clearer that the worst of Beijing's crackdowns are behind us, in particular in the technology sector as they were the first to suffer."
We've pointed out how Chinese stocks were the world's worst-performing market in the third quarter. Take a look at MSCI World versus MSCI China, the largest gap since 1998.
So if short-sellers unwind their bets as Beijing's crackdown on Big Tech appears to ebb, that could add fuel to the latest rally.