January 19, 2022

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China tech stocks rally after punishing start to 2022

Chinese tech stocks rallied on Monday after starting the year with a week of sharp falls, but markets across the Asia-Pacific region were mixed as investors weighed the possibility of an interest rate rise from the US Federal Reserve.

Hong Kong’s Hang Seng Tech index gained 2.2 per cent on Monday, with Alibaba Health Information Technology rising nearly 11 per cent and short video platform Kuaishou’s Hong Kong-listed shares jumping more than 10 per cent. The Star 50 index of Shanghai-listed tech stocks climbed 1 per cent.

The upswings followed a poor start to 2022 that has made Chinese tech stocks underperformers compared with their global peers, which were themselves hit last week by growing expectations of a rate rise by the US central bank.

Even after Monday’s gains, Shanghai’s Star 50 remained down nearly 6 per cent this year, while the US’s Nasdaq Composite gauge has lost 4.5 per cent.

The early stumble in Chinese equities has forced regulators to promise supportive measures in a bid to calm market jitters. Yi Huiman, chair of China’s securities regulator, promised late last week to take “multiple measures to ensure smooth market operations and resolutely prevent large and sudden ups and downs”.

Dickie Wong, head of research at Kingston Securities in Hong Kong, said global institutional investors and mainland Chinese traders were jumping into stocks such as Tencent and Alibaba on Monday.

“Over the past couple of months, Chinese tech stocks have been lagging behind everyone else. It was already time for bargain hunters to buy in,” said Wong.

“This is the time for [Chinese] tech to rebound — at least for those positioned at the top of the market.”

Markets elsewhere in the region were mixed, with South Korea’s tech-heavy Kospi dropping 1 per cent and Australia’s S&P/ASX 200 benchmark slipping 0.1 per cent, as market participants looked ahead to US inflation figures due on Wednesday.

Last week, global traders sold tech stocks in anticipation of rate increases from the Fed, which signalled that it might increase rates “sooner or at a faster pace” than officials had initially anticipated.

Some economists moved up their forecasts for rate rises even after US data released on Friday showed a slowdown in the number of new jobs last month, as the Fed’s focus has shifted from supporting the labour market to taming surging inflation.

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