The rout in China’s largest tech stocks is becoming less severe with each passing bout this year, signaling that investor confidence is slowly returning after regulatory headwinds are seen to have peaked.

The peak-to-trough decline in the first quarter was more than 21%, which has narrowed in subsequent episodes of selling. The latest extended selloff was about 13%. The end of China’s years-long crackdown on the tech industry and earnings beats for some internet bellwethers have helped offset concerns over the sluggish consumption recovery. The Hang Seng Tech Index has outperformed the benchmark Hang Seng Index and the CSI 300 Index, rising over 30% from the trough in October last year.

“This is a sign of a bottom forming in the market,” said Kerry Goh, chief investment officer at Kamet Capital Partners Pte. China’s “policy direction is correct,” he added.

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