Chinese tech stocks face new tariff threats from Trump, Tencent and Alibaba financial reports lead economic recovery
Chinese tech stocks have been weak recently due to escalating geopolitical risks and uncertain economic prospects. However, investors are eagerly anticipating the upcoming financial reports of tech giants such as Tencent and Alibaba this week. They are keen to understand how these tech giants will continue to support their business development before the stimulus policies in China truly take effect, as well as their ability to respond to the re-imposition of high tariffs by the Trump administration.
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Chinese Tech Stocks Struggle as Investors Focus on Tech Giants' Earnings
According to a report by Bloomberg, Chinese tech stocks have been under pressure in recent weeks due to uncertainties both domestically and globally, resulting in a weak overall performance. The Hang Seng Tech Index has dropped about 14% since its peak last month, while the "Nasdaq Golden Dragon China Index," which tracks U.S.-listed Chinese companies, has also declined by 17%. Against this backdrop, the focus of investors this week is on the financial reports of Tencent and Alibaba, hoping for strong performances from these tech giants to drive industry recovery.
The Hang Seng Tech Index Forecasts Record Profits, Making Chinese Tech Stocks Attractively Valued
Despite slight downward revisions in estimates for e-commerce companies like Alibaba and JD.com in recent weeks, profit forecasts for the Hang Seng Tech Index continue to reach new highs. Some economists believe that although the Chinese economy faces challenges, the government has implemented measures and companies are adjusting to cope with the changing environment, which would lead to growth once the economy rebounds. They also point out that valuations of Chinese tech stocks are currently relatively cheap, making them attractive to investors bullish on China's prospects.
Tencent Announces Significant Stock Buyback, Financial Report to Reveal Business Recovery Progress
As China's largest tech company by market capitalization, Tencent is set to release its financial report on 11/13, with market attention focused on the development of its gaming product line and the recovery of its advertising business. Tencent's stock price has already risen by over 40% this year, partly due to the announcement of a HK$100 billion (approximately $13 billion USD) stock buyback plan set for 2024.
Resilience of Chinese Tech Industry Despite Trump's Tariff Pressure
Some analysts point out that despite ongoing pressure from Trump's tariff policies, Chinese tech companies have shown resilience overall, supported by increasing domestic demand in China and government policies. Tech retail company Meituan, for example, benefited from local government consumer voucher distributions, doubling its stock price and becoming a top performer in the Hang Seng Tech Index. Its earnings per share estimate has been raised by about 10% since August. JD.com has also seen a 50% increase in its stock price due to a trade-in subsidy program.
Market Expects Financial Reports to Confirm Tech Stocks' Recovery Momentum
Overall, the market value of the Hang Seng Tech Index has rebounded by $250 billion since its low in September, yet valuations remain cheap, with a forward price-to-earnings ratio of only 16 times, compared to the Nasdaq 100 Index's high ratio of 27 times. Some professionals believe that the shift of Chinese tech stocks from "no investment value" to re-entering investors' sights requires them to deliver results now. They also hope to see more companies engage in stock buybacks, not only to defend shareholder value but also to reflect management's confidence in long-term growth.
China's stimulus measures fall short of expectations, Asian stocks fall, should they conserve ammunition against Trump's trade war?