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Chinese stocks lost sheen for various reasons, including a macroeconomic slowdown. Among all the reasons, Beijing’s regulatory crackdown on its large tech companies led investors to shun Chinese stocks. Furthermore, the fear of delisting from the U.S. stock exchange added to investors’ woes.
Nevertheless, it appears that things are now turning for the better. A recent Wall Street Journal report highlighted that China is ending its probe into ride-hailing giant Didi Global (NYSE: DIDI). Further, regulatory authorities could soon lift a ban on the company and allow it to add new users.
Notably, Chinese authorities blocked Didi from adding new users and drivers last year after it came under investigation.
Following the report, the ADR (American Depositary Receipt) of Didi increased about 35% this week. Moreover, the news had a positive impact on the ADRs of top Chinese companies, including Alibaba (NYSE: BABA), JD.com (NASDAQ: JD), and Tencent Holdings Limited (TCEHY).
Alibaba ADR increased 28% this week. Meanwhile, JD and TCEHY ADRs rose 18% and 12% during the same period, respectively.
Moreover, these stocks have gained significantly in the past month, as reflected in the chart below.
Bottom LineThe easing of regulatory pressure could significantly boost the shares of Chinese companies.
During the last quarter’s conference, Alibaba’s CEO Daniel Zhang stated that “recently, the Chinese government has released important policy signals on its commitment to stabilize the economy and the job market in response to COVID impacts. They have also issued clear statements on promoting the development of internet platform economy through a healthy, regulatory environment.”
While favorable market policies are positive, the macroeconomic slowdown, delisting fears, and the pandemic could remain a drag.
TipRanks’ Stock Comparison tool shows that Wall Street is bullish on BABA and JD stocks. Meanwhile, analysts are cautiously optimistic about TCEHY stock. However, DIDI's stock is not rated as the company announced in May that it intends to delist from the American exchange.
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