Chinese Tech Stocks Rally to Start Week as Investors Eye Bottom

(Bloomberg) — Chinese technology shares climbed on Monday after recording their best weekly advance since January as bargain hunters continued to load up on the beaten-down sector.

The Hang Seng Tech Index rallied as much as 1.5%, led by live streaming giant Kuaishou Technology and Ping An Healthcare and Technology Co. Food delivery company Meituan swung between gains and losses ahead of its results later. Analysts expect a jump in its second-quarter revenue and a net loss to continue.

The rally comes despite a barrage of headlines of new rules for the tech sector, including a campaign to crack down on social media accounts that misinterpret domestic financial topics and the proposal for a credit rating system to regulate live streaming companies. Beijing has expanded its clampdown on private industry to tutoring companies and online gaming in a bid to reduce the wealth gap.

“We may have seen the near-term bottom of the market, after months of selloffs,” said Castor Pang, head of research at Core Pacific Yamaichi International H.K. Ltd. “Although investors are still very sensitive about negative regulations, shares managed to bounce back recently despite negative news from time to time.”

Mainland investors remained net sellers of Hong Kong stocks for a fourth consecutive trading session. They offloaded HK$3.6 billion ($462 million) worth of shares via the trading links with Shenzhen and Shanghai as of 1:19 p.m. in Hong Kong. The Hang Seng Index rose 0.2%, while the CSI 300 Index fell 0.5%.

Among the losers, entertainment and medical beauty stocks continued to be hammered on Monday. Citigroup Inc. analysts said China’s new guidelines on regulating the “fan-based economy” could mean negative financial impact on the sector in the near term. Meanwhile, China is seeking to rectify illicit advertising in the cosmetic surgery industry.

Brokerage stocks also slipped after the securities regulator pushed firms to step up oversight of their margin-financing businesses, a person familiar with the matter said. The CSI Financials subgauge dropped as much as 2.5%, with Orient Securities Co. Ltd. and GF Securities Co. Ltd. both slumping by their 10% daily limit.

Golden Dragon

In the U.S., a bout of frenzied buying from bargain-hunting retail traders helped the Nasdaq Golden Dragon China Index – which tracks 98 firms listed in the U.S. – gain more than 9% last week, snapping an eight-week losing streak. Yet the gauge’s performance faded toward the end of week and investors on Friday were spooked by a report about China’s plans to ban U.S. IPOs for data-heavy tech firms.

“Like all regulatory reforms before, the end of it will be unheralded and visible only in the rear view mirror,” said Justin Tang, head of Asian research at United First Partners in Singapore.

(Updates with brokerage stocks declining.)

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