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China shares thrive when pressure begins to ease

China shares in the Internet sector, led by Ali Baba (BABA) and Tencent Holdings (TCEHY), had its best day on Wednesday in almost three months on the signs that tough regulations are being eased.


The encouraging signs began on Tuesday when reports said that China’s regulators ended a years-long cyber security investigation in the interconnection giant Didi Global (DIDI). On Wednesday, China’s regulators approved 60 new online video games. There was an increase from 45 approvals in May and none in April. It served as another sign that China’s internet regulatory cycle is slowing.

Responsible for Chinese stocks was e-commerce giant Alibaba. The stock jumped 14.7% to close at 119.62 on the stock market today. (JD), which competes primarily with Alibaba in e-commerce, rose 7.7% to 66.47. Shares of Tencent, a leading online gaming provider, rose 7.6% to 51.45.

While the freezing of game licenses is thawing, the latest round of approval did not include games from Tencent or NetEase (DETECTOR).

NetEase, another gaming giant, rose 3.2% to 106.84. Bilibili (BILI) rose 6% to 29.71. The company offers an online entertainment platform that serves younger generations in China.

Bilibili reports first quarter results Thursday morning.

China shares under pressure

The pressure on Chinese stocks is going back as far as November 2020 for a number of reasons. This includes Covid-related closures, restrictive regulations and macroeconomic concerns.

But Chinese stocks began to show signs of life in mid-May when JD reported better-than-expected results for the first quarter. Tencent and Alibaba also topped expectations in their quarterly results.

China’s breakdown of the technology sector has wiped out more than $ 1 trillion in market value over the past two years. The regulatory surplus has led some analysts to call the sector “uninvestable,” according to a report by the South China Morning Post.

Follow Brian Deagon on Twitter at @IBD_BDeagon for more on technology stocks, analytics and financial markets.


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