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Alibaba, other Chinese ADRs surge as Ant Group capital plan approval fuels regulatory easing hopes


Alibaba has faced growth challenges amid tightening regulation of China’s domestic tech sector and a slowdown in the world’s second-largest economy. But analysts say the e-commerce giant’s growth rate could pick up for the rest of 2022.

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U.S.-traded Chinese tech stocks jumped on Wednesday morning after Chinese officials approve capital expansion plan from Ant Group.

The US Depository receives shares of alibaba jumped more than 6% in pre-market trading after the news, as did shares of JD.com. Elsewhere, shares of Baidu and NetEase increase by more than 5% each time, while Trip.com up 4.5%.

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CNBC expert

The moves come as investors are seeing signs of a more relaxed Chinese regulatory environment. Ant Group, which previously had plans for its own IPO disrupted by regulatory concerns, has been allowed to double its registered capital as part of a new plan.

Some investors see softer deregulation for tech stocks, as well as a reversal of the Covid-free policy, as a sign that the Chinese government will support private-sector growth. multiply this year.

“China has shown a notable leniency in recent months, pivoting away from strict COVID controls and withdrawing regulations for sectors that were previously hit by a severe downturn. (e.g. real estate) The Central Economic Work Conference (CEWC) recently set the government’s priority for 2023 to revive consumption and support the private sector,” said Fawne Jiang of Benchmark Capital wrote in a note to clients Wednesday.

ADRs are similar to common shares, but represent a more indirect form of ownership. They also allow Chinese stocks to trade in the US without the companies being subject to US accounting regulations, which has led to concerns that they could be delisted at some point in the year. future.

However, last month, the Public Company Accounting Oversight Commission – the US accounting watchdog – announced that it had received access to inspect accounting firms in China and Hong Kong. This move is considered a positive step in lowering the risk of delisting.

— Michael Bloom of CNBC contributed to this report.

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