In an era of fluctuating government policy, increasing interest rates, and cooling economies, predicting the returns of Chinese technology companies is more challenging than ever.
Let’s look at Alex Yao from JPMorgan Chase & Co. (NYSE:JPM). In March, he downgraded 28 Chinese internet firms and dubbed the sector “uninvestable” just before a considerable bounce. Midway through May, he changed his position to upgrade the industry, and while indexes have risen, the most significant business, Tencent Holdings Ltd. (HKG:0700), has fallen by about 20%. Since Yao upgraded the stock, the gains are just a hair’s breadth away from being erased by Alibaba Group Holding Ltd. (HKG:9988).
According to data gathered by Bloomberg, an investor who followed Yao’s advice on Tencent (HKG:0700) would have suffered a loss of 48 % over the past year, the poorest performance among the experts who watch the firm. Yao has a lot of companions, though. Losses of more than 30% would have resulted from several analysts’ stock trading strategies. Requests for comment from Yao and JPMorgan (NYSE:JPM) went unanswered.
A New York-based portfolio manager at GW&K Investment Management, Tom Masi, said that their feeling is that it will be tough to time the right moment to move into China, and what they are experiencing now is the repercussions of the slowdown from the Covid lockdown, more significant uncertainty about the property market, rising pressure from unemployment. Even by the erratic standards of the tech industry, Chinese internet stocks have experienced enormous swings.
A government regulatory crackdown caused the Nasdaq Golden Dragon China Index of US-listed companies to lose three-quarters of its value between a peak in February 2021 and a trough in March this year. The benchmark then increased by almost 60% after China’s broad assurance that the worst of the examination was behind it. A growing fear that companies may be delisted from US markets and that earnings will be constrained by the slowdown in the economy caused the surge to fizzle out in late June, though.
After failing to get new online game licenses, Tencent’s stock price on Tuesday fell to its lowest level since 2018. People who know the situation said in May that Yao should not have used the word “uninvestable” in his famous March call. According to the persons, JPMorgan (NYSE:JPM) staff members in charge of reviewing the bank’s research requested that it be taken out of the 28 reports written by Yao and his colleagues before they were made public. Still, it managed to sneak through in four of them due to editorial oversight.
Featured Image: Megapixl @Lewistse
