(Bloomberg) -- The page has finally turned for Chinese tech stocks, as the end of a years-long regulatory crackdown revives demand for an industry once dubbed “uninvestable.”

The Hang Seng Tech Index jumped 3.2% Monday, led by Alibaba Group Holding Ltd., after a top central bank official said the clampdown on the Internet sector was drawing to a close. The broader market also advanced, with a gauge of Chinese equities listed in Hong Kong rising 2%. 

The move signals the end of a squeeze on a key driver of private enterprise in China, and comes after authorities scrapped strict Covid curbs and propped up the distressed property sector. The shift has buoyed global markets although it comes at the expense of tycoons such as Jack Ma who has had to cede control of Ant Group Co. to appease regulators.

“After the regulatory reset in late 2020, we see early signs of an easing regulatory environment with the government’s support for the private sector,” Morgan Stanley analysts including Gary Yu wrote in a Jan. 8 note. “For the past 1-2 years, Alibaba has been in focus, so we think it could outperform other Chinese Internet stocks as the environment eases.” 

Sentiment toward Alibaba got a boost after Ma agreed to give up controlling rights of Ant, whose scuttled initial public offering in 2020 marked the start of a sweeping crackdown on the sector. While the change would delay an eventual listing of the firm, it’s in line with an intention by authorities to enhance corporate governance as part of an overhaul.  

Goldman Sachs Group Inc. has added Alibaba to its conviction list in the belief that “the worst is behind” after two years of downward earnings revisions, with a recovery in advertising revenue expected to follow suit. Strategists at Goldman and Morgan Stanley have upgraded their views on a slew of big tech names, citing a faster-than expected reopening and a normalizing regulatory environment. 

“Investors could view this as a major step forward in removing the regulatory overhang since Ant’s IPO failure,” said Willer Chen, senior analyst at Forsyth Barr Asia Ltd. “It’s a positive for Alibaba’s shares and investor sentiment.” 

Jefferies Financial Group Inc. raised Alibaba’s Hong Kong and US share prices on Sunday, saying the company will benefit from quality service and competitive pricing as China’s economy reopens.

Still, the landscape for tech companies has changed significantly in recent years with closer regulatory scrutiny on data protection, online gaming as well as a push to untangle investments in other firms. At its peak in 2020, Alibaba’s shares hit HK$307.40, compared with Monday’s closing price of HK$110.40. The consensus expectation of analysts surveyed by Bloomberg is a target price of HK$134.85.

Alibaba is not alone. Shares of Tencent Holdings Ltd. closed at HK$362 in Hong Kong on Monday, down almost half from its peak reached in 2021.

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For now, investors are embracing the improved outlook, with the Hang Seng Tech gauge having rallied more than 60% from an October low. Risk-on sentiment prevailed across Asia Monday, putting a key MSCI benchmark on track to enter a technical bull market. 

As a whole, Chinese equities are benefiting from an improved outlook as policy makers deploy pro-growth policies and the nation’s borders reopen. Goldman expects China’s stocks to gain another 15%, helped by low valuations and policy pivots in areas such as housing.

--With assistance from Charlotte Yang.

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