The Nasdaq Golden Dragon China Index is up 12% in October, one of the best months since June 2020. The tech index has been clubbed like a baby seal amid Xi’s campaign to reign in powerful tech companies. In the year, the index is still down 26% but has possibly constructed a double bottom.
Another positive development comes from South China Morning Post, which reports that Alibaba’s founder Jack Ma traveled to Europe for the first time since Beijing’s crackdown on his tech empire. Days ago, there were reports Ma was spotted in Hong Kong. Alibaba’s Hong Kong-listed shares jumped 7% Wednesday and have entered a bull market of more than 20% this month.
There’s a consensus among traders that Xi’s campaigns to rein in major tech players is abating, and this could suggest there are stock bargains to be had:
“It’s time to accumulate more technology stocks,” said Jackson Wong, asset management director at Amber Hill Capital Ltd. “It’s getting clearer and clearer that the worst of Beijing’s crackdowns are behind us, in particular in the technology sector as they were the first to suffer.”
In the third quarter, Chinese stocks were the world’s worst-performing market in the world as Xi crushed nearly every industry, from property to gaming to school tutoring. The regulatory crackdown has created slower economic growth and sparked a liquidity crisis for the country’s largest property developer, Evergrande Group. MSCI China Index lagged global stocks this year by the widest in two decades.
Looking for opportunities, U.S. billionaire investor Charlie Munger recently swooped in and doubled down on his Alibaba position after shares were halved. It seems Munger has found a deep value opportunity, something we outlined weeks ago.
Earlier this month, Beijing’s smaller-than-expected fine on food delivery giant Meituan for violating anti-monopoly regulations was another positive sign that crackdowns were abating.
The timing of possible crackdowns subsiding comes ahead of a meeting early next month among China’s top leaders. There is also the Beijing Olympics early next year, and we’re assuming that Beijing will do everything in its power to stabilize markets ahead of these key events.
U.S.-listed Chinese tech stocks are also bouncing back in a big way this morning as a possible squeeze is underway.
Wed, 10/20/2021 – 07:14
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Author: Tyler Durden