The MSCI China index gained 4.5% in March against a gain of only 2.8% for world stocks and the Shanghai Composite has just closed out its best quarter in more than two years, with a 5.9% gain.
Derrick Irwin, a portfolio manager at U.S. asset manager Allspring Global Investments, said the Alibaba breakup and founder Jack Ma returning to China appear part of an effort by the government to extend an olive branch to entrepreneurs.
"This may reignite investment in the private sector," he said.
China has since late 2020 waged a crackdown on a broad range of industries, leaving startups and its biggest companies alike operating in an uncertain environment. It punished tech companies for monopolistic behavior among other issues, levying large fines on e-commerce firms including Alibaba.
Rob Brewis, a portfolio manager at UK-based asset manager
Aubrey Capital Management Ltd, said the firm had moved back into
Chinese equities this year, mainly based on economic recovery
hopes and cheap valuations.
Aubrey also bought Alibaba earlier in the year, having not
owned it for the past two years. Alibaba's recent plans are
positive, said Brewis, who planned to keep "decent exposure".
Alibaba's shares are up more than 14% in
the five days since the company's announcement and some 11.7
billion yuan ($1.7 billion) in foreign cash has flowed into
China's markets.
That's already more than the net 9.2 billion yuan in inflows
in February and drove March flows to 35.4 billion yuan and the
quarter's inflow to a record of 186 billion yuan.
HUNDRED FLOWERS MOMENT? Alibaba's plans, which investors think augur another era of growth and capital raising for the company are being viewed as a broad sign of a policy shift because the firm and its billionaire founder were high-profile targets during the crackdown. The 11th-hour scuttling of Ma's Ant Financial's $37 billion public listing in November 2020 ushered in a period of unpredictable government and regulatory scrutiny that sent Alibaba stock down some 80% over two years to last October. Last week's announcement comes on top of supportive comments from the authorities. Premier Li Qiang assured foreign investors that China would unswervingly adhere to reform and opening up, expanding market access and optimising the business environment. As many as 67% of investors in the United States are now seeing the start of a trend towards more business friendly actions from Beijing, a recent survey by BofA Securities found, according to a note seen by Reuters and a source familiar with the matter. BofA Securities declined to comment. Ernest Yeung, a portfolio manager at U.S. asset manager T. Rowe Price, anticipated "a gradual process of stabilisation" of private enterprises and the internet sector. His team has been focusing on investing in "forgotten or out-of-favour" stocks, and built a position in Alibaba last year. The lingering question is how China reconciles its commitment to business with its political ideology. Investors will watch "whether this is like Mao's 'Let a hundred flowers bloom' campaign that will just be reversed if it doesn't serve the interests of the Party," said Brian Jacobsen, senior investment strategist with Allspring. ($1 = 6.8822 Chinese yuan) (Reporting by Xie Yu in Hong Kong and Jason Xue in Shanghai; Editing by Jacqueline Wong)
