Chinese Tech Stocks Rebounds as Investors Buys in Dip After Historic Loss

Chinese tech stocks took u-turn rebounding after a sharp fall in the past three sessions, afters some investors saw buying dip opportunity.

The Hang Seng Tech Index climbed as much as 7.3% in early trading on Wednesday, erasing some of the 22% decline since late last week that saw the gauge touch new lows every day. The broader benchmark Hang Seng Index also gained as much as 3.6%.

Tencent Holdings Ltd. and Alibaba Group Holding Ltd. were among the best performers, advancing at least 6% each. The broad gains tracked an advance overnight of Chinese stocks listed in U.S. exchanges.

However, headwind still lies ahead of Chinese stocks with lingering regulatory risk at home, possible delisting of Chinese firms in U.S.. Additional risks remains from concerns related to Beijing’s ties with Russia and further lockdown due to surging COVID-19 cases in the country.

Earlier JPMorgan Chase & Co. earlier this week labeled some Chinese internet names as “uninvestable.”

“Given that the Hang Seng’s recent plunge is one of the worst in over five decades, we believe such high short volume suggests market capitulation, rather than an omen of what looms,” said Hao Hong, chief strategist at Bocom International Holdings, as reported by Bloomberg.

“Such intense short volume can be the fuel for violent market rebound, but will also take some time to dissipate given its sheer volume. At this juncture, patience is a virtue.”