chinese tech stocks

Nasdaq100 has added over 2% on Monday, in contrast with a more modest gain of 0.8% for the S&P500 and a barely notable 0.3% rise for the Dow Jones. But this is not a signal of general optimism from market participants; instead, it’s a switch in focus to Chinese companies. Often the outperformance of technology-rich Nasdaq is taken as a signal of an accelerating economy and a move by investors to look for assets that outperform the broader market during an economic boom. But along with that, we would see the Russell Index, which includes 2,000 small US stock market companies, outperform. And it was only up 0.2% over Monday, struggling to move into positive territory by the end of the day yesterday. On the other hand, Chinese companies are going from weak to growth drivers. However, this is nothing more than a recovery from lows after a year of aggressive declines. Earlier in March, China’s H-shar lost more than half its value in 13 months of sell-off. Hong Kong’s Hang Seng was down 40% at its lowest point, plunging to 2016 lows. In the first half of March, the most significant acceleration came on signals that China and the US had moved from trade wars to financial wars as the latter threatened to delist. However, financial market turbulence is the last thing Xi Jinping needs this year, as there will be an election at the end of it, where he will be the leading candidate. Improving the economic situation is often the most effective way for the incumbent to gain electoral support. And China has a lot to work with. Much the same can be said for the US, where the November Senate elections will be held. Democrat Biden’s record-low approval rating plays against his party in the coming elections and the rising stagflation threat. The threat of delisting from the US is a blow to prestige, but it also closes off access to the softest financial terms for new companies and the deepest pool of liquidity. China could only afford it in the event of mania in Chinese markets and a booming Chinese economy. But that is not the case right now. The PRC economy lags behind its forecast growth trajectory due to continued covid lockdowns. Achieving the expected 5.5% GDP growth this year requires stimulus and easing of monetary policy, regardless of inflation risks and without regard to the rest of the world, which is tightening policy. This is a favourable environment for the market, at least for the time being. The Chinese equity market thus ceases to be a ‘sick man’, dragging global equity indices down and suppressing investor interest. On the contrary, even after returning to 5-week highs, Chinese equities still look very cheap, turning into a leading idea for the markets with a 9% jump in Baidu and a 6.6% rise in Alibaba on Monday. Placed amongst others in the US, Alibaba and Baidu, the biggest of which are now pulling the indices up, spreading positivity across the entire tech sector. Twitter’s 27% jump in shares on reports of Musk’s 9.2% stake in the company says more about the market’s mood to look for growth drivers than how much this passive share of the Tesla CEO can help the social network. And that’s good news a couple of weeks before the start of the new reporting season after a worrying first quarter.

Asian markets fall, ex-China Wall Street suffered another day of recession fears overnight, with equities slumping once again, relying on Bostic’s comments to salve the wounds and cap US yield rises and the US dollar rally. The S&P 500 retreated by 3.20%, with the Nasdaq slumping by 4.29%, and the Dow Jones losing 1.97%. No sector was spared, notably, and despite high inflation, cash is increasingly becoming King. The rot has stopped in Asia, with US futures attempting to claw back some of the overnight losses as the bottom-feeders come out to play. S&P 500 futures have risen by 0.60%, Nasdaq futures have jumped by 0.95%, and Dow futures have gained 0.45%.   In Asia, equity markets initially tumbled in response to the Wall Street moves, in a rerun of yesterday. However, the recovery by US futures this morning seems to have taken the edge of the sell-off, with Asian markets recouping some of their earlier losses. Japan’s Nikkei 225 is now down just 0.44%, with South Korea’s Kospi down 0.47%,   Meanwhile, after a tough session yesterday, the intraday rally in sentiment has pushed mainland China exchanges well into positive territory. The Shanghai Composite and CSI 300 have rallied by 1.0%. Hong Kong was pummelled earlier today but has also recovered somewhat, but it remains 2.25% lower for the day.   In regional markets, Singapore is still down by 1.20%, while Kuala Lumpur is unchanged, and Jakarta has slumped by 2.90% led by resource stocks. Taipei has retreated by 1.65%, while Manila is down 1.0% post-election, with Bangkok managing a 0.30% gain. Australian markets are also in retreat, the ASX 200 and All Ordinaries falling by 1.30%.   What makes the session odd is that markets with a high sensitivity to the China slowdown are the worst performing in Asia today, but mainland equities have rallied. The cynic in me suspects that China’s “national team” are busy today supporting the market, especially as covid-zero policies remain in force and nerves are rising around mainland property developers once again.   European markets will struggle to construct a bullish case today as well, also President Putin not declaring a was on Ukraine at yesterday’s May Day parades could be a straw to grasp. The question is really whether the bounce in US equity futures today is the start of a recovery or merely a corrective bounce to short-term oversold indicators. This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.