Chinese tech stocks are either a good buy or a trap in market slump, investors say
- A 38 per cent rebound in Chinese tech stocks in Hong Kong and New York is spicing up the market after a year-long regulatory crackdown
- Investors and analysts are challenged by regulatory unknowns and zero-Covid policy in gauging the market outlook
The Hang Seng Tech Index jumped 4.6 per cent on Wednesday, tracking an overnight 3.4 per cent advance in the Nasdaq Golden Dragon China Index. Since hitting multi-year lows on March 15, Alibaba Group Holding and JD.com have soared more than 50 per cent while Tencent Holdings jumped 31 per cent.
News about approvals for new online-gaming titles, and speculation about an end to cybersecurity investigation on ride-hailing operator Didi Global, are entrenching the view that China has dialled back its hostility against “the disorderly expansion of private capital”.
01:31
Shanghai residents confront officials after swift return of lockdown
Here’s what money managers are saying about the tech stocks and the sector that sway trading sentiment in the Hong Kong and mainland China stock markets.
BNP Paribas
The imminent conclusion of Didi’s cybersecurity review and the introduction of the “traffic light” scheme for tech regulation suggest China might be easing its crackdown on the tech sector, strategists Jason Lui and Zhang Cici wrote on June 8.
Investors could consider buying an up-and-out call option on the Hang Seng Tech Index for more upside leverage, a trading strategy they said would limit capital at risk because of the high volatility in these stocks.
Mizuho Securities
“With concerns about US consumer demand and economic outlook, we sense that sentiment in China Internet is improving,” James Lee, managing director of the Japanese brokerage’s US unit, wrote in a report on May 23. His top picks are Baidu and JD.com.
05:39
Hong Kong’s Temple Street fortune-teller predicts what’s ahead for the Year of the Tiger
