Shares in Alibaba and other Chinese companies have come under intense pressure recently.
Greg Baker/AFP via Getty Images
Shares in some of China’s largest companies notched eye-watering gains on Wednesday amid reports from state-run media that the government would support the stock market and boost economic growth.
(ticker: BABA) stock was up 18% in premarket trading in the U.S., with its Hong Kong-listed shares tearing 27.3% higher. E-commerce peer
(JD) saw premarket gains of 19% after jumping more than 35% in Asian trading.
surged 15% before the New York open after gaining 23% in Hong Kong.
Optimism has swept investors after a report from state-run Xinhua News Agency said the Chinese government would keep its stock markets stable and work to boost economic growth. The report linked the news to a decision from the financial stability and development committee under China’s State Council.
Chinese stocks, and especially U.S.-listed Chinese stocks, have been the subject of a brutal selloff that has accelerated in the last week. The gains for Alibaba, JD.com, and others mostly undo recent declines; both stocks had lost around a quarter of their value in the past five days.
Investors have fretted over a painful trifecta of pressures, including ongoing U.S. regulatory concerns, new Covid-19 lockdowns in China, and the existential risk of futures sanctions if China aids Russia in its war on Ukraine.
The news out of China included positive developments on the regulatory front, with reports citing state-run news outlining support for overseas listings. The threat that Chinese stocks would be delisted in the U.S. over a lack of accounting transparency has been a major headwind for the sector in recent months.
The Chinese government apparently has maintained good communications with U.S. regulators and have been working on a cooperation plan.
For companies like Alibaba, the gains notched Wednesday could be just the beginning.
As Barron’s has previously reported, at least two key factors are required for an Alibaba turnaround: A marked improvement of the regulatory environment and a turnaround in the fundamentals of the Chinese economy and consumer spending.
If the Chinese government follows through with the State Council’s pledges, both of those factors could become a reality.
Write to Jack Denton at email@example.com