(Bloomberg) — A gauge of Chinese technology shares rallied by the most in three months as investors took advantage of attractive valuations in the battered sector and the prospect of looser monetary policy conditions.
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The Hang Seng Tech Index rose 5% on Wednesday to close at a one-month high, with all but two of its components gaining. The move, which tracked a rally overnight for U.S.-listed Chinese peers, was led by JD.com Inc. and Meituan, which advanced at least 9% each. The benchmark Hang Seng Index added 2.8%.
The entry of “bargain hunters” after the big selloff was followed up with covering of some short positions, said Jian Shi Cortesi, a portfolio manager at GAM Investment Management in Zurich. “At the same time, expectations on China policy have turned to see more support.”
Gains in the tech gauge came as large brokerages and asset managers including Goldman Sachs Group Inc. and Fidelity International tout opportunities in Chinese equities this year. Supporting the call are views that Beijing’s regulatory crackdown has peaked and the equity selloff is bottoming out, while China’s monetary policy is set to turn loose in sharp contrast to the Federal Reserve.
With Wednesday’s gains, the Hang Seng Tech Index has now rebounded more than 10% from its bottom last week, but is still down some 40% from its February 2021 peak. Meantime, JD.com and Alibaba Group Holding Ltd. have rallied more than 20% from their recent lows.
“Year-to-date, there hasn’t been big, new crackdown measures announced by Chinese regulators, which boosted some investors’ confidence that maybe it is time to buy,” said Steven Leung, executive director at UOB Kay Hian Hong Kong Ltd.
Still, calls for a bottom have become a difficult endeavor in a market that’s been rocked by Beijing’s sweeping crackdown on private enterprise.
A group of asset managers and brokers had turned bulls of Chinese stocks in the fourth quarter, including Goldman, UBS Group AG and BlackRock Inc., citing attractive valuation. That may have been too early,…