China Tech Stocks & ETFs: Uninvestable Or Screaming Buys?

Photo by Hanny Naibaho on Unsplash

Chinese tech stocks staged a remarkable turnaround last week after regulators promised support for companies’ listing of shares abroad and “market-friendly policies”. This came after days of panic selling in stocks like Alibaba (BABA - Free Report), Tencent Holdings (TCEHY - Free Report), (JD - Free Report), and Pinduoduo (PDD - Free Report), thanks to rising geopolitical and regulatory uncertainty.

Alibaba shares are surging more than 13% today after the tech giant boosted its repurchase program. The most popular China tech ETF KWEB (KWEB - Free Report) has soared almost 50% since the start of last week but is still down about 60% over the past year.

Chinese tech stocks lost trillions of dollars in market value over the past year, mainly due to regulatory crackdown. KWEB had however gathered about $8 billion in 2021 as investors continued to buy the dip.

Since the war in Ukraine started, China’s ties with Russia and possible sanctions on some Chinese companies have added to investors’ worries. Russian stocks have become almost worthless due to sanctions imposed by the US and its allies.

Recent resurgence in China’s Covid-19 cases and renewed lockdowns due to its zero-tolerance policy, have further disrupted supply chains and suggest more economic slowdown.

Adding to worries were recent regulatory developments as last week, the SEC announced that five Chinese companies could be delisted from the US exchanges. JPMorgan recently downgraded 28 Chinese stocks and said the companies are “uninvestable.”

Given how oversold these stocks were, an impressive short-term rebound makes a lot of sense. In the near term, these stocks will continue to be driven by geopolitics and regulatory headlines than by fundamentals.

To learn more about KWEB and the Invesco China Technology ETF (CQQQ - Free Report), please watch the short video below.

Video Length: 00:09:20

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