China’s Cracking Down On Tech. Yet Semiconductor Stocks Are Climbing. What’s Up?

China’s Cracking Down On Tech. Yet Semiconductor Stocks Are Climbing. What’s Up?
Andrew Rummer

over 2 years ago1 min

As pressure from Chinese regulators pushes investors to flee local champions like Tencent and Meituan, stocks in more fundamental technologies are doing just fine. 

As the chart shows, the Hang Seng Tech Index – which includes WeChat owner Tencent, food delivery app Meituan, and ecommerce giant Alibaba – has tumbled 43% from its peak on February 17th. The Global X China Semiconductor ETF (ticker: 3191), meanwhile, has climbed 13% as companies like Hangzhou Silan Microelectronics surged. 

Stocks listed in both Hong Kong and mainland China have been going through a sharp rotation as investors adjust to new regulations and rhetoric emerging from government agencies. Several consumer-facing apps have been slapped with antitrust fines, data protection punishments, and warnings to obey labor laws – hitting their shares hard. 

At the same time, companies considered to be central to China’s strategic goals have been climbing. Sectors getting a boost include: semiconductors, where China is keen to prop up supply of domestically-produced chips; renewable energy; and defense. 

Investors are coming round to the idea that China’s vision for the future is dominated by hard-nosed tech advances, not frivolous social media and ride hailing apps. 



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