Technical Indicators Could Hint at China Tech Rebound

Fundamentally, the efforts of the government of China to reinvigorate economic growth via stimulus measures may also have a positive effect on its tech industry. Technically, indicators may already be hinting at a tech comeback.

When it was clear that the real estate property development crisis was still hampering China’s growth prospects, investors ditched Chinese stocks, but the sell-off may be subsiding. The disparity between market tops and bottoms of Chinese tech stocks have decreased as the months go by.

“The rout in China’s largest tech stocks is becoming less severe with each passing bout this year, signaling to some investors that confidence is slowly returning with regulatory headwinds seen to have peaked,” reported Bloomberg, noting that China’s government was cracking down on monopolistic behavior of large tech companies in recent years, but has since eased on further regulatory measures.

“The peak-to-trough decline in the first quarter was more than 21%, which has narrowed in subsequent episodes of selling,” the report added. “The latest extended selloff was about 13%. The end of China’s years-long crackdown on the tech industry and earnings beats for some internet bellwethers have helped offset concerns over the sluggish consumption recovery.”

The report also cited that the “Hang Seng Tech Index has outperformed the benchmark Hang Seng Index and the CSI 300 Index, rising over 30% from the trough in October last year.” All signs seemingly indicate that a bottom has been reached.

“This is a sign of a bottom forming in the market,” said Kerry Goh, chief investment officer at Kamet Capital Partners Pte.

2 ETFs to Note

Given the recent market movements, it could be an opportune time to buy into China exchange traded funds (ETFs), especially those that focus on tech. One to consider is the KraneShares CSI China Internet ETF (KWEB).

KWEB measures the performance of publicly traded companies outside of mainland China that operate within China’s internet and internet-related sectors. The fund provides exposure to the Chinese internet equivalents of Google, Facebook, Amazon, and eBay, which includes names like Alibaba Group and Tencent Holdings.

Another to consider is the KraneShares Hang Seng TECH Index ETF (KTEC). The fund offers exposure to Hong Kong internet stocks, e-commerce companies, fintech firms, and other tech-related companies.

KTEC seeks to track the aforementioned Hang Seng TECH Index. The index itself includes the 30 technology companies in Hong Kong’s burgeoning tech sector with the highest free-float market capitalization.

For more news, information, and analysis, visit the China Insights Channel.