Today, Chinese tech stocks are on the move, in a big way. Shares of Alibaba (NASDAQ:BABA), Baidu (NASDAQ:BIDU), Bilibili (NASDAQ:BILI), JD.com (NASDAQ:JD), Weibo (NASDAQ:WB) and Pinduoduo (NASDAQ:PDD) were all up big this morning. Shares of each of these Chinese tech giants saw meaningful gains, providing value investors with a nice boost.
Indeed, Chinese tech stocks have been hit hard in recent months. Starting with a $2.8 billion regulatory fine to Alibaba, a wide range of Chinese tech stocks have been targeted by the government. This is for a number of reasons.
A range of anti-monopoly probes, security probes, and more recent probes we’ll get to in a second are the cause of this concern. Accordingly, the Chinese tech sector is one that’s fallen out of favor rather rapidly with investors who were once bullish on the red-hot stocks.
Indeed, the positive price pressure these stocks saw this morning has since abated this afternoon. Investors appear to be pricing in further scrutiny from President Xi around the ties between China’s financial institutions and private firms. Indeed, the CCP seems intent on ensuring its grip over the economy remains tight. For investors, this means more volatility is likely on the horizon from here.
That said, let’s take a look at the big catalyst which drove Chinese tech stocks higher initially today.
Why Chinese Tech Stocks Are Rebounding Today
Investors appear to be pricing in bullish sentiment once again. It appears the hype is around the conclusion of a regulatory probe into a major Chinese company. The CCP announced it had fined Meituan (OTC:MPNGY) the equivalent of $534 million.
Why would investors become bullish on Chinese tech stocks after a fine was issued?
Well, for one reason, this fine was less than investors expected to pay. Meituan was expected to be hit with a fine of at least $1 billion. Accordingly, the size of this fine suggests the Chinese government doesn’t want to seriously hurt its companies.
Secondly, this fine marks the conclusion of the government probe. With this headwind having dissipated, investors can look forward to the future. Uncertainty with any stock is a bad thing. Accordingly, investors may feel a little more certain about the state of these Chinese tech stocks today.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
