Stock investors try to keep a finger on the pulse of “hot markets”. That has been a tricky ordeal as no market offers any stability whatsoever. Moreover, the Chinese tech stock rally is fading out, which may be problematic for Chinese crypto coins.
Chinese Tech Stock Rally Ends Abruptly
It is always a matter of time before a bullish market reverses momentum. Nothing can go up in value forever. Investors thinking otherwise are a few minutes away from seeing their portfolio value plummet. Although Chinese tech stock had a good rally earlier this month, that momentum has evaporated. Again, it was written on the wall, as there is a glass ceiling for growth and expansion.
While it is good to see Chinese technology stock post high earnings, that growth has an upper limit. One good quarter or year doesn’t solve a company’s long-term problems. That explains why the Golden Dragon China Index has dropped significantly, as its “members” have lost $190 billion since January 2023. Recovering such steep losses will not happen overnight, as further pain is on the horizon.
Contrary to expectations, the losses primarily stem from Alibaba Group. Despite strong Q4 profits, the company hasn’t rekindled interest in Chinese tech stock. If anything, it has made investors even more risk-averse. There are still many regulatory concerns to consider, and the US-China tensions continue to heat up. That latter aspect will become more outspoken if China provides weapon support to Russia.
Moreover, investors seem very spooked by anything that can have a long-term negative impact. Whether it is ongoing COVID concerns, political tension, or price wars in the Chinese market, it all looks rather bleak. While some companies try to price gauge competitors, that “spat” cannot continue indefinitely. Getting out of Chinese tech stock is the best option today.
Fearful Earnings Calls Await
It is worth noting the “big nine” of Chinese tech stock are delivering their Q4 2022 earning calls. Alibaba, Baidu, and Vipshop have released numbers that beat expectations by some margin. However, JD.com, Bilibili, and Trip.com can’t share numbers until late March. That creates a month-long uneasy window of opportunity that can send Chinese tech stock in either direction. Moreover, geopolitical concerns remain a pressing issue.
One other cause for concern is the Bao Fan mystery. Somehow, no one can figure out where or why the infamous dealmaker went off to. However, the disappearance has many of the elite on edge and may spark a revival of the private sector. An interesting quarter lies ahead for all Chinese companies, although the outcome might not be too favorable.