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China tech rout: views diverge on market purge of ‘uninvestable’ stocks as ‘fear feeds on itself’
- Investors face a roller-coaster ride as Chinese tech stocks rebounded amid speculation China will step in to help instil confidence
- Views diverge among money managers and seasoned China analysts in one of the wildest swings in recent market history
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JPMorgan Chase’s dramatic downgrade this week of Chinese internet stocks under its coverage – from Alibaba Group Holding to Bilibili and Weibo – has shaken global investors even as they have yet to recover from the trillion-dollar onslaught in 2021.
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The slump during Asia’s trading hours on Tuesday wiped out US$300 billion from the Hong Kong market alone, while an 8 per cent dive in Shanghai over two days was the worst since August 2015. If the Wall Street bank is right, and prices retraced to its discounted price targets, investors should brace for more pain.
A surge in Omicron in mainland China and Hong Kong has clouded economic recovery, while the Ukraine invasion has amplified stagflation and recession worries. There is also the perennial issue of Chinese ADR delisting agenda, and possible sanctions implicating offshore Chinese stocks over China’s stance on Ukraine invasion.
Here’s what some of the biggest money managers are saying about the sector that JPMorgan described as “uninvestable” over the next six to 12 months.
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“Overseas-listed Chinese tech stocks represent less than 2 per cent of the MSCI All-Country-World’s market capitalisation,” said Wang Yan, chief emerging markets and China strategist. “Wholesale liquidation of these stocks may not be a meaningful part of diversified global portfolios, but it is more than enough to devastate this asset class.
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