Alibaba, Chinese companies listed in the United States will make a big comeback in 2023 | CNN Business

Hong Kong
CNN
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Chinese tech giants are off to a dream start to the year.

The Nasdaq Golden Dragon China Index, a popular index that tracks U.S.-listed Chinese companies, soared 13% in the first two trading days of 2023, marking its best start to the year, according to data compiled by Refinitiv dating back to 2003.

U.S.-listed shares of Chinese e-commerce companies Alibaba ( BABA ) , JD.com ( JD ) and Pinduoduo ( PDD ) added $53 billion to their combined market value on Wednesday. So far this week, its market capitalization has increased by nearly $70 billion.

In contrast, major US stock indexes have been mostly flat over the past two sessions.

The surge comes as investors feel optimistic that Chinese regulators will take notice of tech companies this year and also introduce measures to boost the sector’s growth.

Hong Kong-listed Alibaba shares also rallied sharply. It has risen 12% so far this year, recovering almost 70% from its all-time low at the end of October.

The change in sentiment comes after Jack Ma’s Ant Group secured key approval for capital expansion. Ant Group is a fintech subsidiary of Alibaba, both founded by Ma.

“Ant Group’s approval to expand its consumer finance business marked another positive step in easing regulatory risks,” said Yeap Jun Rong, market analyst at IG Group.

Chinese tech companies have faced a heavy regulatory crackdown since late 2020, driving away investors. In 2021 and 2022, the Nasdaq Golden Dragon China Index plummeted 46% and 25%, respectively.

The China Banking and Insurance Regulatory Commission has approved an application by Ant to expand its share capital from $1.2 billion to $2.7 billion, according to a government notice issued late last week.

After the fundraising, Ant will control half of its key consumer finance unit, while an entity controlled by the Hangzhou city government will hold a 10% stake. Hangzhou is where Alibaba and Ant have been headquartered since their inception.

The approval is a major step in Ant’s restructuring, which has been pushed by regulators and has been going on for more than two years. It also marks a crucial step in its long-term plan to go public.

In November 2020, regulators abruptly pulled the plug on Ant’s $37 billion IPO, which was billed as the largest ever. A month later, they ordered Ant to review his business.

The latest approval of Ant’s capital expansion plans has fueled hopes that Chinese authorities want to improve ties with the private sector as they focus on economic growth this year.

Last month, Chinese leaders pledged at a key meeting to focus on boosting growth in 2023, after the zero-Covid policy battered the economy and sparked public discontent last year.

“Softer calls for regulatory reforms and a greater emphasis on economic growth have come into focus in recent months,” Yeap said.