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China Tech Stocks Rally Following Substantial Gaming Approvals

UTC by Tolu Ajiboye · 3 min read
China Tech Stocks Rally Following Substantial Gaming Approvals
Photo: Depositphotos

The approvals of 60 gaming licenses in China have stoked bullish investor confidence in tech stocks with the Hang Seng Tech Index advancing 4%.

China tech stocks embarked on a recent rally following a few video game approvals in the East Asian nation. For instance, the Hang Seng Tech Index experienced more than 4% gains as stock bulls’ confidence grew.

On Wednesday, the Chinese government approved 60 gaming licenses suggesting that the debilitating year-long tech crackdown was waning. This crackdown had shrunk China’s tech market value by around $2 trillion. However, the rise of the 100-day moving average on the Hang Seng Tech Index for the first time in 15 months suggested that this rally may sustain.

E-commerce giant Alibaba Group Holding Ltd and online entertainment purveyor Bilibili Inc led the tech stocks rally in China. In addition, other tech mainstays such as Tencent Holdings Ltd and NetEase Inc also saw their shares climb. This happened despite the fact that both Tencent and NetEase were absent from the approval list.

Positive China Tech Stocks Development Comes on Heels of Latest Didi Investigation News

China’s gaming approvals also closely follow an earlier report that Beijing was concluding its investigation into Didi Global Inc. The leading app-based ride-hailing and logistics platform was under investigation by the Chinese Cyberspace Administration over alleged security and data breaches. This led to Chinese regulators suspending Didi apps from all mobile stores and platforms in the country. The conclusion of this investigation, which also includes two other firms, Kanzhun Limited and Full Truck Alliance Co, will likely result in heavy fines for all three companies. These include a relatively steep fine, especially for Didi, as well as a 1% share transfer to the state. The government is doing this to have some vested sway over the affairs of the accused businesses. In return, Didi, for instance, will potentially see its main apps restored to mobile stores this week.

Speaking on Didi, an analyst at Forsyth Barr Asia Ltd, Willer Chen said:

“I think the market is still excited about the potential restore of Didi on Apps stores and feels a bit risk-on sentiment.”

In addition, Chen also touched on the latest gaming license approvals and the general positive optic it presented. According to the analyst, “the newest batch of gaming license approval, though Tencent and NetEase are not on the list, is also good news.”

Gaming Crackdown & Path to Overall Tech Redemption

Last year’s tech crackdown extending to gaming seemed practical. At the time, Beijing was looking to curb gaming addiction, especially among children and adolescents. The government introduced stringent measures and policies to abide by. However, Tuesday’s approvals show a step toward the normalization of previously existing policies.

Also speaking on how the tech side of things is currently playing out in China, Winnie Wu, China equity strategist at BofA Securities, explained:

“When the economy is struggling, the tightenings will take a break and the policy will become more pro-growth. So during those times we could see a strong trading rally of the internet sector in general, because they remain to be some of the largest, most liquid stocks that investors are familiar with.”

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