image

International Investor Concerns Mount Over China’s Tech Rout

Tuesday’s falls included a 9% plunge in internet giant Tencent, its worst in a decade, as its WeChat social network suspended user registrations while it underwent an upgrade “to align with all relevant laws and regulations”.

China’s blue-chip index dropped to its lowest in nearly eight months, the yuan hit its lowest since April and Hong Kong slumped 5%.

In U.S. trading, the Nasdaq Golden Dragon China benchmark of Chinese tech stocks listed in New York fell another 6%, taking its losses since Friday past 20% and wiping $500 billion off its value.

“The spectre of state intervention into controlling the private sector has created a crescendo of panic selling,” said Sean Darby at Jefferies, calling it an iron fist in a velvet glove.

William Russell, head of product specialists equity at Allianz Global Investors, said the moves had left investors blindsided.

“A key question is what are policymakers in China trying to achieve?” Russell said. One thing was clear, he said: Beijing wanted to prevent companies becoming too dominant.

Graphic: BATs vs FAANGs https://fingfx.thomsonreuters.com/gfx/mkt/egvbknonxpq/Pasted%20image%201627380472497.png

China is readying a Personal Information Protection Law which calls for tech platforms to impose stricter measures to ensure secure storage of user data.

Beijing-based tech consultant Zhou Zhanggui said investors were over-reacting to the “rectification” of Chinese tech companies.

The Institute of International Finance (IIF) estimated that China’s equity markets suffered outflows of $600 million on Tuesday after bleeding $2 billion on Monday.

Monday’s sell-off was triggered by a clampdown on the $100 billion private education industry which sent shares of tutoring providers such as New Oriental Education & Tech Group and Scholar Education Group down more than 45%.

The sell-off is creating a “risk is that you get some kind of contagion across all Chinese equities … and investors will get really cautious,” said Rand Wrighton, head of international equities at Barrow Hanley Global Investors.

U.S. exchange traded firm ARK Invest, headed by celebrity fund manager Cathie Wood, said it had dumped shares of Alibaba, Baidu, Tencent, KE Holdings and Byd.

The firm has also begun cutting stakes in JD.com and game-streaming company Huya since Beijing launched a crackdown on ride-hailing company Didi Global.

Graphic: Chinese stocks in U.S. tumble from February highs https://graphics.reuters.com/CHINA-STOCKS/PERFORMANCE/dwpkrgzkbvm/chart.png

Tuesday’s heavy falls in Asia also included delivery platform Meituan, which dropped 17%, and ecommerce company Alibaba, which tumbled nearly 8%.

Tencent and Alibaba account for 10% of MSCI’s $8 trillion Emerging Market index. Chinese firms make up around 37% of the index, up from 17% a decade ago.

Investment banks estimate U.S. investors hold about $1 trillion of Chinese internet and tech stocks, or have U.S. listings known as American Depositary Receipts (ADRs) that Washington has also been clamping down on over the past year.

“It’s definitely a reminder to investors of the risks in emerging markets,” said Gael Combes, head of fundamental research equities at Unigestion.

While the market had known state-owned enterprises were used to pilot the economy, “the tech, internet and fintech companies were valued close to the valuation we’d have in the U.S., and so didn’t discount the regulatory risk,” he said.

AXA’s Sailesh Lad said fixed income markets were also affected.

Chinese 10-year government bond futures were down 0.35%. Bonds in property company Evergrade have now halved in price since late May amid concern about its future.

On contagion risk, investment firm Mirabaud underlined that other than Tencent’s founders, only one Chinese institution is on the list of its top 20 shareholders.

Alibaba’s biggest shareholder is Softbank, the U.S. ADR top 20 list is full of U.S. and international funds, and the Hong Kong listing is also dominated by international institutions. There is also no Chinese institution in the top 25 holders of the third of the BATs trio, Baidu.

Arnim Holzer, strategist with EAB Investment Group, is advising clients to hedge their portfolios against further China-related volatility in a number of ways, including options positions that would profit from swings in emerging market bonds.

“While I think we may be approaching a bottom in some of the hard-hit Chinese stocks, there is still a likelihood that investors may need to de-risk some of their technology-oriented portfolios,” he said.

China fears https://graphics.reuters.com/CHINA-STOCKS/INVESTORS/zgvomwnaavd/chart.png

(Additional reporting by Medha Singh, Danilo Masoni, Sujata Rao and Karin Strohecker in London and Rodrigo Campos, Saqib Ahmed and David Randall in New York; editing by Timothy Heritage)


Source link

0 0 votes
Article Rating

S’abonner
Notifier de
0 Commentaires
Commentaires en ligne
Afficher tous les commentaires
Reset Password

Avertissement sur les risques :

Le trading peut vous exposer à des risques de pertes supérieures aux dépôts et ne convient qu’à une clientèle avisée ayant les moyens financiers de supporter un tel risque. Les CFD sont des instruments complexes et présentent un risque élevé de perte rapide en capital en raison de l’effet de levier. Entre 74 et 89% des comptes de clients de détail perdent de l’argent lors de la négociation de CFD. Vous devez vous assurer que vous comprenez comment les CFD fonctionnent et que vous pouvez vous permettre de prendre le risque élevé de perdre votre argent. Ce site n’est en aucun cas une offre de conseil en investissement ni une incitation quelconque à acheter ou vendre des instruments financiers. Trader le Forex et/ou les CFD’s implique un niveau de risque élevé, et peut ne pas être approprié car vous pouvez subir des pertes supérieures à votre dépôt. L’effet de levier peut être en votre défaveur.

Vous devez être conscient et avoir une compréhension complète de tous les risques associés au marché et au trading. Le site Union-trader.com peut être amené à produire des commentaires d’ordre général, ce qui ne constitue pas des conseils en investissement et ne doit pas être interprété comme tel.

Veuillez recourir aux conseils d’un conseiller financier extérieur. Le site Union-trader.com décline toute responsabilité pour les erreurs, inexactitudes ou omissions et ne garantit pas l’exactitude ou le caractère complet des informations, textes, graphiques, liens ou autres éléments contenus dans cette documentation. Toute information et toute mise à disposition sur le site ont un caractère privé.