China’s Internet companies experienced the ‘peak of regulation’: KraneShares

The Chinese government is unlikely to introduce new regulations for the internet technology sector and there may be more support going forward, according to Jonathan Crane of KraneShares.

“I think we’ve seen the peak of regulation,” he told CNBC. “Squawk Box Asia” Wednesday.

He said the rules introduced in recent years are aimed at creating long-term stability in the sector.

“I think that happened in the past,” said Crane, founder and CEO of KraneShares. “I don’t expect much regulation in the future.”

He added that the Chinese technology industry makes up a large part of the economy.

“It’s a very important sector, it’s China’s consumer — so I think you’ll see a lot of support around that sector going forward as China reopens.”

Chinese tech stocks have had some tough years yet organizational repression And amid ongoing Covid restrictions, though, the sector recovered slightly as hopes reopened.

Is it time to buy?

some analysts say Chinese stock valuations look cheap.

Ramez Shilat of Vontobel Asset Management said he was relatively optimistic about the internet sector – but added that he was selectively so.

The portfolio manager pointed out companies that are improving their market share and operating efficiency.

“We’ve seen JD in particular stand out in this regard,” he told CNBC “Street Signs of Asia” on Wednesday, noting that the e-commerce giant had significantly beaten estimates for two consecutive quarters and improved profit margins in its core business while trimming losses elsewhere.

JD.comHe said the decision to move away from Southeast Asia was also in line with its plan to boost profitability.

Portfolio manager says we are relatively optimistic about the Internet sector in China

Mitwan Sheilat also added that it has significantly improved its profit margins in the food delivery business.

“We think they’ve firmly established themselves relative to Alibaba in the food delivery business, and they now have control of, you know, 60% plus market share,” he said.

Crane said China’s internet stocks are a consumer play that will benefit as China reopens and consumers start spending again.

“We see 2023, as China opens up, these Chinese Internet names have a lot of positive aspects,” he said.

Disclosures: Vontobel owns shares of and Meituan; And Ramez personally carries a dinar.

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