Jack Ma disappeared for more than two years.
He fled China in the fall of 2020 after daring to criticize the government's tech regulators.
Ma kept a very low profile overseas, leaving many concerned about his fate... But now he's back.
As most readers know, Ma is the CEO of tech giant Alibaba (BABA) – often called "the Amazon of China."
It's a $246 billion Chinese technology conglomerate – the world leader in online retail. Alibaba's consumer base is actually bigger than Amazon's... And it's still growing.
Over time, the company has developed an incredibly diverse business model...
Alibaba first made its mark in e-commerce in the 2000s, offering business-to-business, business-to-consumer, and consumer-to-consumer platforms. It then expanded into mobile-payment processing, manufacturing, film production, and even artificial intelligence.
The problems for Alibaba and Ma started in October 2020, when the tech guru publicly criticized China's government... He compared one key group of regulators to an "old man's club."
Soon after that, the Chinese Communist Party ("CCP") began harshly regulating Big Tech firms, like Alibaba, throughout the country.
In fact, the CCP canceled an initial public offering for Alibaba's financial affiliate, Ant Group, the very next month. Alibaba and its peers were then caught in a grinding two-year downturn... and Ma fled the country.
His disappearance became a symbol of China's anti-tech stance. But in April, he publicly reemerged on the Mainland, touring a school in his hometown of Hangzhou.
Ma's return sent a strong signal that the Chinese tech crackdown is nearing its end. And today, we have even more evidence that the worst is over for these companies. That could translate into big upside for investors who buy Chinese tech stocks.
Let me explain...
Harsh government regulations crushed the Chinese tech space for two long years...
Since November 2020, the sector has erased about $1.1 trillion in value. Alibaba alone shed about 70% of its market capitalization.
We can also see this plunge reflected in the KraneShares CSI China Internet Fund (KWEB). This exchange-traded fund ("ETF") contains a broad basket of Chinese tech companies, and it tracks the sector as a whole.
KWEB shows us the impact of China's regulations on tech firms. And it's not pretty...
As you can see, tech stocks weathered a "long winter" due to Beijing's clampdown... KWEB has fallen significantly since its 2021 peak.
However, the ETF is beginning to turn higher today. And that's because China's regulatory grip is rapidly loosening.
In January, one of the CCP's chief economic agencies put out new regulatory guidelines for Big Tech. But the tone of those regulations was decidedly more dovish...
The agency is promoting what it calls "the healthy and sustainable development" of these companies, describing their business practices as "legitimate, just, and necessary."
Additionally, Chinese Premier Li Qiang met with major Chinese tech firms last week and urged them to "continue to promote innovation and breakthroughs" for the sake of the economy.
Chinese President Xi Jinping is promoting a thaw in the tech sector as well... In a CCP Central Military Commission meeting last week, he described efforts to build a higher-standard and more open Chinese economy.
It's a classic formula for outperformance... When an investment narrative flips from "bad" to "less bad," it means that the worst is over. It also leaves plenty of room for upside as things continue to improve.
And that's exactly the setup we have in Chinese tech today. It was a long, cold winter for these companies... But today, more and more "green shoots" are emerging. And the upside could be terrific for those who invest now.
If you want exposure to the Chinese tech sector, you can add a number of high-profile brands, like Alibaba, to your portfolio... They're extremely cheap after the regulatory crackdown and are poised for continued growth. As an alternative, you can buy KWEB to ensure exposure to the whole tech sector.
As Chinese tech companies finally thaw out, and more lenient regulations enter the space, now is the time to secure big gains.
Sean Michael Cummings
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