Chinese stocks had a furious rally as authorities signaled support for Chinese stocks and ADRs after worries about delisting compounded weakness in these stocks. There are also signs that Chinese and U.S. regulators are closer to a cooperation plan on how to audit Chinese stocks listed on U.S. exchanges.
There have been fears that Chinese stocks listed in the U.S. could be collateral damage as relationships between the two countries sour. So, this was a welcome development and a pivot from the CCP's focus on inequality and curbing the market power of large tech companies.
As a result, stocks in Hong Kong and China climbed by more than 10%, while Chinese stocks listed in the U.S. were up more than 40% due to a combination of a relief rally and short-covering.
Chinese internet and technology stocks have been crushed over the past couple of years. Globally, these types of stocks have underperformed as the world entered a new economic regime with structurally higher inflation, interest rates, and growth rates. However, Chinese stocks performed the worst as the government enforced a brutal crackdown around privacy, market power, and other issues. Adding to these fears was the risk of Chinese stocks being delisted from the U.S. over concerns about accounting, national security, etc.
In a broader sense, Chinese authorities felt that the country had become too capitalistic and needed to rein back these tech companies which were becoming increasingly powerful and multinational. As a result, the KraneShares CSI China Internet ETF
However, there are some signs that the situation may be improving as Chinese authorities are increasingly focused on boosting economic growth. There are also signs that capital may be leaving the country given fears of an escalation in the situation between Russia and Ukraine. And, these concerns are more salient given that coronavirus cases are once again on the rise in the country which has led to some lockdowns in certain areas.
