Investors looking for a good deal in beat-up value sectors started buying Chinese technology stocks. Worried about AI-related suppliers like Super Micro Computer (SMCI) or Nvidia (NVDA) nearing a peak, investors may have speculated on China instead.
This will prove a dangerous strategy.
The sell-off in Chinese tech stocks accelerated last week. The 618 event is an annual sales event that JD.com (JD) invented for June 18 (mid-year), did not do well this year. Sales fell by 7% Y/Y to 742.8 billion yuan (around $100 billion), according to Syntum’s estimates.
In the last month, Alibaba (BABA) stock lost around 8%. JD.com lost over 11% and PDD Holdings (PDD) lost 12%.
Yuan Steady
After China’s central bank intervened to stabilize the Yuan, the currency held a seven-month low against the U.S. dollar. The country benefits from the spot yuan falling, which would increase the attractiveness of Chinese exports. Japan’s Yen is not performing well, either. It closed at a 37-year low last Friday in Tokyo.
As currency falls for Asian countries, China must do more to support its growth. China industrial companies posted an 0.7% Y/Y increase in profits. The performance signals a lack of momentum in the economy recovery.
Your Takeaway
Chinese tech stocks typically rally without notice. They also fall severely without showing signs of a reversal. Investors should treat JD, BABA, and PDD stock as potential value traps.
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