The Trillion Dollar Question for Investors: Are Chinese Technology Stocks Already Down? There are glimmers of hope on the regulatory side, but this week’s selloff is a reminder that the market is still swimming in dirty, treacherous waters.
S&P 500 formally entered bear market territory Monday: Investors are concerned that persistent inflation in the US could mean more aggressive rate hikes from the Federal Reserve, which could push the economy into recession. Chinese stocks, which were rallying, were not immune. This is true, even though China will likely ease the trend of monetary tightening as evident in most other places.
The Hang Seng Tech Index fell nearly 5% during the past few days, giving up some of last week’s 10% gain – which began on hopes that China’s years-long crackdown on its technology giant would finally end. is happening. The benchmark, which tracks Chinese tech stocks listed in Hong Kong, has lost more than half of its value since its peak in February last year.
Beijing Will soon complete its cyber security review Chinese ride-hailing giant Didi, The Wall Street Journal reported last week. The company has been a bellwether for China’s crackdown on the industry: Regulators launched an investigation shortly after the stock was listed in New York nearly a year ago. Didi was evicted from New York on Friday As a prerequisite to end the review, with an 84% loss to end its disastrous journey in the market. Earlier this month, Chinese regulators also approved 60 videogame titles – only the second such approval since July last year.
While the most brutal phase of the crackdown on what policymakers have dubbed the “disordered expansion of capital” is probably over, the regulatory landscape in the industry is over. has changed fundamentally, While the days of freewheeling growth are probably gone for good, the role of consumer tech companies as employers of both educated college graduates and gig workers will be a more important consideration for Beijing.
Slowdown in Chinese economy accelerated by China’s zero-covid policy Additional risks to the future growth of these companies, Things could start to improve in the coming months as the worst spring lockdowns in Shanghai and other cities appear to be coming to an end. But sporadic disruptions have already occurred after the temporary reopening as cases resurfaced again and again. Uncertainty in the global economy as central banks everywhere prepare to tackle inflation will be another challenge.
After a protracted and volatile selloff, investors will probably jump at every positive sign of a better regulatory environment for Chinese tech stocks. In fact the worst could end. But it is different from the new Bull Run.
A black global economy, China’s own fight to control the Omicron version, and rising US rates, along with other concerns, mean that Chinese tech stocks will still struggle to return to their former lofty highs.
Didi, headquartered in Beijing, has been a bellwether for China’s crackdown on the tech industry.
photo:
Gilles Sabri/Bloomberg News
write to Jackie Wong jacky.wong@wsj.com
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