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How China’s war on tech companies can hit ASX shares where it hurts

ASX investors could find themselves uncomfortably close to China’s expanding war on its own tech companies.
The post How China’s war on tech companies can hit ASX shares where it hurts appeared first on The Motley Fool Australia. –

ASX share investors have been watching the US$1 trillion stock rout triggered by China’s war on tech companies from the safety of fortress Australia.

But distance may not provide much protection as the re-writing of China’s economic rulebook could hit us where it hurts.

At first blush, Australian investors are just relieved. Most of us have little or no exposure to Chinese tech companies listed in the US.

Share meltdown of China tech companies yet to infect the ASX

China is using a big regulatory stick on its home-grown tech titans that have chosen to cosy up to foreign investors. The vicious sell-off in the DiDi Global Inc – ADR (NYSE: DIDI) share price, Alibaba Group Holding Ltd – ADR (NYSE: BABA) share price and Tencent Holdings ADR (OTCMKTS: TCEHY) share price says it all.

Thank goodness China’s arms can’t quite reach our tech darlings like the Afterpay Ltd (ASX: APT) share price, Xero Limited (ASX: XRO) and WiseTech Global Ltd (ASX: WTC) share price.

Fallout from China’s war on its tech shares

But the Asian giant’s expanding war on companies to include education should ring warning bells for ASX shares. It shows that China is not done with its attempts to stamp its authority on everything within its expansive borders.

There are reports that US and other foreign investors are spooked. They are contemplating pulling up stumps and will sell all Chinese assets in their portfolio. This includes equities, bonds, credit and other assets.

No one knows where the next battle front will be, and what makes this war scarier is that it’s driven by politics, not economics.

Has China become uninvestable?

China has shown its happy to cut its nose to spite its face, and that could make the country uninvestable.

This comes at a time when our largest trading partner overtook the US as the number one destination for new foreign direct investment in January this year.

Xi Jinping might be regrowing the bamboo curtain to ringfence his country. But this is no longer Mao Zedong’s China. The country is too integrated with global markets these days and it needs foreign capital to grow.

ASX shares could soon feel the heat

This is where China’s expanding war on tech can bite ASX shares. If China’s growth declines, we will feel it in just about every part of our economy.

It’s not just the BHP Group Ltd (ASX: BHP) share price, Rio Tinto Limited (ASX: RIO) share price and Fortescue Metals Group Limited (ASX: FMG) share price that will hit the skids.

Foolish takeaway

It brings some comfort that the Chinese authorities have reached out to international investors to calm fears.

But in unpredictable China, global investors may be tempted to sell first and ask questions later. China is unlikely to stop at just two sectors.

As for ASX investors, don’t get too comfortable watching this sideshow from afar.

The post How China’s war on tech companies can hit ASX shares where it hurts appeared first on The Motley Fool Australia.

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