Alibaba, Bilibili extend gains as China approves more game

US-listed Chinese stocks rallied for a third day after China approved a second batch of video games this year, marking a further softening in the country's stance toward Internet firms.

The Nasdaq Golden Dragon China Index gained 5.7 per cent on Wednesday (Jun 8), hitting a 3-month high and extending an 8.9 per cent rally across the previous 2 sessions. Tech giant Alibaba Group Holding was among the top gainers, advancing 15 per cent to its highest since early February. Live-streaming platform Bilibili jumped 6 per cent, while e-commerce firm JD.com rose 7.7 per cent.

After a tech crackdown that ensnared sectors from e-commerce to fintech and even online education, Beijing has taken a more lenient line, introducing policies aimed at propping up the group and the Chinese economy. The Wall Street Journal reported that regulators are preparing to wrap up their investigation into Didi Global and restore the ride-hailing giant's main apps to mobile stores as soon as this week.

"The worst is behind us in terms of earnings and regulations," said Adam Montanaro, investment director at Abrdn. The gaming approvals are a continuation of "the government's more supportive tones and gestures toward the Internet economy", he said.

Bruised Chinese Internet stocks have emerged as a bright spot at a time when US peers are still gripped by prospects of higher interest rates. Easing of lockdown measures in major cities, together with a string of better-than-expected earnings, are also boosting risk sentiment.

That said, Beijing's persistence with its Covid Zero strategy remains a source of concern, and some bearish strategists, including DZ Bank's Manuel Muehl, view the current optimism as premature.

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The gains have trimmed the Nasdaq Golden Dragon China Index's drop this year to 11 per cent, beating the Nasdaq 100's 23 per cent slump. While the basket has topped a key moving average, it's still down more than 60 per cent from its peak set in February last year. BLOOMBERG