From BlackRock to JPMorgan, China stock funds bleed with mistimed optimism on tech rebound and regulations

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Key China-focused vehicles managed by BlackRock, JPMorgan, Fidelity and E Fund Management reported steep losses in third quarter

Analysts have trimmed their price targets for Alibaba, Tencent and Meituan by up to 25 per cent since May, with most retaining their buy calls

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Investors took a heavy beating last quarter trying to decode China’s tech crackdown as price targets for Alibaba, Tencent and Meituan are chopped. Photo: Reuters

Zhang ShidongandCheryl Heng

Published: 7:30am, 8 Nov 2021

It was supposed to be a turning point for stock investors betting on an end to a year of regulatory assaults on Chinese technology companies. Alas, that optimism has so far proved to be mistimed.

BlackRock, JPMorgan, Fidelity and E Fund Management posted a 14 per cent to 20 per cent decline in their flagship equity funds from July to September, according to Bloomberg data. They ranked among the worst performances since at least the end of 2018.

More than US$460 million of market value in tech stocks in Hong Kong has been erased in regulatory crackdowns since authorities foiled Ant Group’s stock offering this time last year. Analysts have trimmed their price targets for Alibaba Group Holding, Tencent Holdings and Meituan by 18 to 25 per cent over the past six months, with most still sticking to their buy calls.

“Shares of some well-run listed companies have seen significant declines recently because of concerns about policy uncertainty and a slowdown in the economy and corporate profits,” Zhang Kun, a fund manager in Guangzhou at E Fund, said in his latest quarterly report to investors. “Valuations are basically reasonable and these companies are expected to deliver quite visible profit growth in the coming three to five years.”

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The MSCI China Index, tracking mostly offshore Chinese stocks, slumped 18 per cent last quarter, while the Hang Seng Tech Index in Hong Kong lost 25 per cent. Money managers can now add China’s economic slowdown, a resurgence in Covid-19 cases and growing debt defaults among property developers to their lists of setbacks.

The latest fund reports underscore the challenge facing investors who have ploughed ever more money into the onshore stock and bond markets. The trail of profits and the lure of global index inclusion have kept investors upbeat and hopeful of a dose of policy stimulus to fix the current malaise.

From BlackRock to JPMorgan, China stock funds bleed with mistimed optimism on tech rebound and regulations

Key China-focused vehicles managed by BlackRock, JPMorgan, Fidelity and E Fund Management reported steep losses in third quarter Analysts have trimmed their price targets for Alibaba, Tencent and Meituan by up to 25 per cent since May, with most retaining their buy calls

Key China-focused vehicles managed by BlackRock, JPMorgan, Fidelity and E Fund Management reported steep losses in third quarter

Analysts have trimmed their price targets for Alibaba, Tencent and Meituan by up to 25 per cent since May, with most retaining their buy calls