China concept stocks, especially technology stocks, have experienced an epic slump in the past two years, and they are still breathing at the bottom. Compared with the trend of the US science and technology bubble in 2000, the trend of this round of China concept stocks slump is very similar, and the subsequent trend is also Will it be the same?
The Hang Seng Technology Index has fallen more than 58% from its all-time high in February 2021, and the two U.S.-listed funds that track Chinese technology stocks, KWEB and CQQQ, have fallen even more deeply, with both falling more than 70% from their 2021 highs.
Comparing the movements of KWEB and the Nasdaq during the dotcom bubble in 2000, the two are very similar. The orange-red in the figure below represents KWEB, and the blue represents the Nasdaq index, which can be said to be exactly the same in terms of the decline and the duration of the decline.
Judging from the sentiment indicators of news reports, the sentiment has also improved, with more positive and positive news. In September and October last year, there were the most negative news about China concept stocks. At that time, technology stocks were under attack from both China and the United States. Domestic anti-monopoly investigations were intensified. The US SEC required US-listed Principality companies to publish audit papers, and may even require them to be delisted.
This year, the domestic aspect has changed to “supporting the platform economy and the sustainable and healthy development of the private economy.” In the US SEC, the two countries have conducted detailed consultations on how to allow the US Public Company Accounting Oversight Board (PCAOB) to visit China.
If you simply compare the Nasdaq index 20 years ago, it seems that Chinese technology stocks have fallen to the bottom. When can we get out of the pit? Compared with the Nasdaq index, which continued to fall for nearly 2 years, then began to climb slowly, and encountered a global crisis in 2008 and suffered a major retracement until 2015. .
In recent trading days, the trend of Chinese technology stocks has been significantly stronger than that of Nasdaq, and more mainland fund managers have begun to agree with the value of Hong Kong technology stocks.
On May 25, Zhou Keping, manager of China AMC Fund, said in a live broadcast that the Hong Kong stock market may naturally be at one of its lowest positions, and we think this position is actually worthy of attention. There is no doubt that the Hong Kong stock market is at a very large bottom in its medium and long term, and this bottom is comparable to 2008.
On May 10, Qiu Dongrong, the fund manager of ZhongGeng Fund, said in the live broadcast that the most optimistic part is the Hong Kong stock market. Moreover, he also adjusted the investment ratio of the funds he manages to Hong Kong stocks to a maximum of 50%.
Over the past year or so, we have always believed that the investment opportunities in Hong Kong stocks are structural. We mainly buy more companies with low valuations, such as coal, oil, banks, and mobile operators.
However, since the second half of last year, Hong Kong stocks have fallen sharply, especially since the beginning of this year, after further declines in Internet companies, the entire valuation and pricing have reached the level of systematic undervaluation.
Now the investment opportunities in Hong Kong stocks are not only the value stocks we liked before, but even growth stocks, including Internet companies, including pharmaceuticals, including technology, including consumption. Many companies in growth stocks are also very cheap in terms of valuation and pricing. Companies with a dozen times or even single-digit valuations abound.
The point is that these companies are not only cheap, but also very good. They are also the leading companies in various industries, and even the best companies in the Chinese economy, are listed on the Hong Kong stock market.
edit/emily
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