(CapitalWatch, Oct. 7, New York) Chinese tech stocks rallied across the board Thursday on revived hopes of a thaw in Sino-American relations, with Alibaba Group Holding (NYSE: BABA; HKEX: 9988) surging 10% in the biggest one-day jump since 2017.
The relief comes after top U.S. and China diplomats met in Switzerland Wednesday to discuss pressing issues including trade and Taiwan. The talks resulted in an arrangement of a virtual meeting between President Joe Biden and President Xi Jinping, announced to take place before the year-end.
Markets soared, interpreting the news as a sign of a warming in the battered relations. Alibaba peaked at $158.29 per share early on, also boosted by reports of Charlie Munger's raising his BABA stake by 83% in the third quarter. Meanwhile, Alibaba's e-commerce rivals JD.com Inc. (Nasdaq: JD; HKEX: 9618) and Pinduoduo Inc. (Nasdaq: PDD) both jumped 6% by midday. Gaming conglomerate Tencent Holdings (OTC: TCEHY; HKEX: 0700) surged 8%, its rival NetEase Inc. (Nasdaq: NTES; HKEX: 9999) was up 7%, and internet giant Baidu Inc. (Nasdaq: BIDU; HKEX: 9888) rose 5%.
Retail software and services provider Baozun (Nasdaq: BZUN; HKEX: 9991) soared 11% to $19.10 per share. Last week, Baozun landed a $217 million investment from Alibaba's logistics arm Cainiao, and analysts are taking note of the rising interest for the cheap stock from hedge funds including BlackRock, Morgan Stanley, and Vanguard.
Among the big gainers was RLX Technology Inc. (NYSE: RLX) – the vaping giant trading cheap on Wall Street skyrocketed 14%. Social and entertainment platforms gained, with Zhihu Inc. (NYSE: ZH), Huya Inc. (NYSE: HUYA), Bilibili (Nasdaq: BILI), and iQyi Inc. (Nasdaq: IQ) up 11% each. EV makers Nio (NYSE: NIO) and XPeng Inc. (NYSE: XPEV) jumped 7%; Li Auto (Nasdaq: LI) was up 5%. The battered ride-hailing giant Didi Global (NYSE: DIDI) rose 3% to $7.82 as of midday.
Conflicts Far From Resolved
But while the two nations call to continue discussions, conflicts glare out of several points of contact with no resolution in sight. President Biden has made it clear that he will not immediately lessen the tariffs on Chinese imports amplified under Trump, even as they hurt some American businesses and consumers. Earlier this week, U.S. Trade Representative Katherine Tai criticized China for unfair trade practices and failing to comply with the trade deal. She also said the U.S. will apply punitive measures and involve allied nations to push back on China.
The trade deal, signed in January 2020 under Trump, is set to expire at the end of 2021.
Further, CIA has just upped its efforts to counter national security challenges related to China. CIA Director William Burns said on Thursday that the new China Mission Center "will further strengthen our collective work on the most important geopolitical threat we face in the 21st century, an increasingly adversarial Chinese government."
The agency also established a new unit to work on transnational technological threats – which by the sound of it appears to also involve China. When appointed in early 2021, Burns added to the anti-China rhetoric by calling out on China's digital arsenal and making it CIA's top priority. At around the same time, the National Security Commission on Artificial Intelligence issued a report urging doubling federal R&D spending for AI-powered technologies while limiting China's access to chips and protecting U.S. sensitive technology.
As to Taiwan, Biden said this week that he and President Xi confirmed their commitment to the existing agreement during their phone talk last month. But considering China's intensifying tour de force and Biden's AUKUS act with Australia and the U.K., both nations are stepping in on the disputed territory.
Taiwan is the world's biggest hub for chip foundries, with Taiwan Semiconductor Manufacturing Co. (NYSE: TSM) as the globe's biggest supplier. Earlier, Washington forced TSMC to abide by its sanctions on Huawei Technologies. Now, the chip giant, building plants in the U.S. and supplying top chip developers like Apple (Nasdaq: AAPL) and Qualcomm (Nasdaq: QCOM), is dealing with Washington's request to disclose information on its supply chains amid the global chip shortage. And as Taiwan's situation worsened over the past month, TSM stock slipped nearly 11%, even with today's gains of 2%.
U.S. benchmarks S&P 500, Nasdaq Composite, and Dow Jones gained over 1% intraday Thursday; the Hang Seng Index ended 3% higher.