Investing.com -- US-listed Chinese stocks rebounded on Tuesday, with Alibaba (NYSE:BABA) gaining more than 4% in premarket trading after suffering its biggest one-day drop since 2022.

The KraneShares CSI China Internet ETF (NYSE:KWEB) rose 1% as of 05:36 ET in New York, while Alibaba recovered from Monday’s 10% decline.

The sell-off was triggered by a memorandum from former President Donald Trump, which proposed restrictions on US-China investments.

The memo called for a review of variable interest entity (VIE) structures—used by Alibaba and many other Chinese firms to list in the US.

Dip buyers stepped in during Tuesday’s Hong Kong session, though Alibaba's (HK:9988) stock there still closed 3.8% lower.

Other major Chinese stocks trading in the US also saw gains in premarket trading, with JD.com up 1.9%, PDD rising 1.5%, Baidu (NASDAQ:BIDU) edging up around 1%, and Bilibili (NASDAQ:BILI) climbing 2.9%.

“This is without doubt a buying opportunity for southbound investors like us, especially as the drop in ADRs does not impact the changed narrative around China tech,” said Zeng Wenkai, managing director at Shengqi Asset Management Co in a note seen by Bloomberg.

“I would compare China’s AI rally to the mid-to late 2023 rally for Nvidia (NASDAQ:NVDA) so it has much more of the journey to go.”

Trump’s memo also reignited concerns about accounting practices at some foreign firms, stating that the US government would ensure compliance with its regulations.

This brought back memories of 2022 when heightened scrutiny of Chinese companies sparked fears of potential delistings from US exchanges.

Meanwhile, as reported by Bloomberg, an analysis of filings from 14 US pension funds with Chinese stock investments revealed that most have been cutting their exposure since 2020.

The shift away from China continues to gain momentum among emerging-market investors. Last year, 24 ex-China EM equity funds were launched—a record high—up from 19 in 2023, according to Bloomberg data.

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