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Chinese technology stocks rebounded as a strong set of quarterly results from e-commerce group JD.com helped allay investors’ concerns about Beijing’s regulatory attack on the sector.
Shares of JD.com rose 14.9 percent in Hong Kong on Tuesday after the company reported strong revenue and user growth in the second quarter. Separately, Cathie Wood’s Ark Investment Management announced that it had bought the shares of the e-commerce company after the earnings release.
Shares of other Chinese companies that have weathered a regulatory storm also rose, with the Hang Seng Tech Index closed 7.1 percent higher. Internet conglomerates Tencent and Alibaba gained 8.8 and 9.5 percent respectively, while food delivery activity Meituan rose by more than 13 percent.
Tuesday was the second day of strong buys for Chinese technology stocks, which have lost billions of dollars in value in recent weeks after Beijing slammed into parts of the market ranging from education to gaming.
“For the first time in months, I had a strong preference for long-term global investors coming to buy,” Andy Maynard, a trader at investment bank China Renaissance, said of clients who bought Chinese technology stocks on Tuesday. “In Meituan alone, I had pretty much every customer we buy today.”
JD.com said second quarter revenue grew more than 26 percent year-on-year to Rmb 253.8 billion ($39.2 billion), better than analyst estimates. The company also added a record 32 million users during the period, bringing its total user base to more than 531 million. The number of users grew by 27.4 percent year-on-year.
“We believe that the regulatory objectives are conducive to JD’s long-term business growth. So far, our business has maintained steady growth as we commit to better compliance policies,” JD Retail chief executive Xu Lei said during an interview with analysts.
Ark, which quickly sold Chinese tech stocks, including JD.com, after the Beijing curtailment, revealed it had bought back 164,889 shares in the e-commerce group.
Shares of JD.com were down more than 36 percent since a February high.
Shares of Alibaba have fallen nearly 40 percent this year and the group was fined a record $2.8 billion in April for anti-competitive behavior. Chinese regulators scrapped the proposed $37 billion IPO of its fintech affiliate Ant Group in November and imposed rounds of rectification measures in the months since.
JD.com’s net income fell to just under Rmb750 million, down from 16.4 billion a year ago, which the company attributed to higher marketing spend.
JD.com executives claimed that new regulations, such as a ban on forcing merchants to sell their products on only one platform, had actually helped the ecommerce group, sparking an influx of new suppliers to its platform.
“We believe that this policy is not intended to be restrictive. . . the Internet and relevant industries,” said Xu, “but rather to create a fair and orderly environment and promote the long-term sustainable development of these industries.”
Chucheng Feng, founder of the political research group Plenum, said the Chinese government’s announcement last week of a “common prosperity campaign” calling on companies to give more back to society had provided clarity to the country’s tech giants.
“Beijing clearly does not want to destroy the technology sector, it is one of the few sectors where China has a leading role,” Feng said. “After two decades, Beijing wants them to essentially do something for the government.”
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