Insights

Chinese Tech Stocks Come to Life

China may still be in trade talks with President Trump, but that’s not keeping money away from the country’s technology sector.

The PowerShares GoldenDragon Halter Index ($HXC) is up more than 3 percent today and on pace for its highest close since early October. The gains follow two weeks of consolidation above the 50-day moving average, a potential sign that momentum has turned.

Never heard of the index? It’s still likely you know some of its important members like Alibaba (BABA), Baidu (BIDU) and JD.com (JD).

There doesn’t seem to be any news to explain their rallies, but a few things seem to be going on. First is the simple return to risk assets after the fourth quarter’s big selloff. As reported recently on
Market Insightssafe havens have simply fallen out of favor. Fast-moving Chinese technology stocks are pretty much the opposite of safe havens.

PowerShares GoldenDragon Halter Index ($HXC) with 50-day moving average and Line at Price indicator.

Second, money has shifted to “
weak-dollar” assets and emerging markets. Investors began the year focusing on Brazil, but this week’s seeing a shift to Chinese names. Did you know the U.S. dollar is on pace for its lowest close against the yuan since July?

That’s especially impressive when you consider the strength of the U.S. economy. Normally the kind of numbers we
saw yesterday should lift the greenback. The fact it’s not happening seems to reflect bullish investor sentiment.

Third, technology stocks are ripping again – especially after
semiconductors bounced yesterday.

Finally, 2018 brought a slew of new Chinese technology stocks. Here are some of those
IPOs:

・Huya (HUYA): Videogames

・Iqiyi (IQ): Streaming video, the “Netflix of China”

・Pinduoduo (PDD): E-commerce

Some other actively traded names in the Chinese tech space include:

・Vishops (VIPS): E-commerce

・Momo (MOMO): Mobile gaming

・Ctrip.com (CTRP): Online travel agency

Disclosure: This post is intended for educational purposes only and should not be interpreted as a trade recommendation.


This article was written by David Russell, TradeStation Securities, Inc., part of the Monex Group Inc, published on 25/01/2019.

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