China Tech Stocks Advance as New Game Licenses Stir Optimism

Chinese technology stocks rose on Tuesday as Beijing’s approval of new video game licenses fueled bets that the country’s crackdown on the sector may have peaked.

Companies that obtained new licenses jumped, with XD Inc. soaring as much as 24% and Baidu Inc. climbing 3.3%. Even industry giants Tencent Holdings Ltd. and NetEase Inc., which were noticeably absent in this round of approvals, rose more than 5%. The Hang Seng Tech Index gained as much as 2.5% after declining for four days.

The broader market also got a boost after the China Securities Regulatory Commission pledged again to maintain market stability. The Hang Seng Index climbed as much 1%, led by technology stocks.

The improved policy tone comes after the Hang Seng Tech Index lost steam in recent trading sessions, following a short recovery last month. The weakness of the sector had prompted Daily Journal Corp., a newspaper and software business that counts Charlie Munger as one of the overseers of its stock portfolio, cut its stake in Alibaba Group Holding Ltd. in half. Alibaba share climbed as much as 1.5% on Tuesday.

“The resumption of game approval is a positive development to China’s games industry and will help boost investor confidence that the government remains supportive of cultural and innovative aspects of the games industry and could signal resumption of a more regular approval process,” Citigroup Inc. analyst Alicia Yap wrote in note.

The positive development also follows Beijing pledging to keep capital markets stable in mid-March, after more than a year of crackdown on technology companies. Online games had come under fire for stoking addiction among youths and the government had announced a slew of measures to curb playing time last year.

Author: Jeanny Yu, Bloomberg

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