After-coronavirus stocks are red hot again as resurgence of epidemic and Hong Kong unrest spurs haven demand

Tencent and Meituan climbed to record highs last week as the resurgence of the coronavirus rattles the US and protests roil Hong Kong

New-economy stocks are long-term bets as they are set to benefit from times of uncertainty, Swiss wealth management firm UBP says

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Meituan Dianping is one of the new economy stocks that has been flying high. Here, its food delivery drivers are seen in Shanghai. Photo: Reuters

Published: 7:00am, 6 Jul 2020Updated: 7:25am, 6 Jul 2020

A resurgence of the coronavirus epidemic and social unrest in Hong Kong has been fuelling a fresh run-up in China’s new-economy stocks, spanning from gaming companies and online food delivery to biopharmaceuticals and networking.

Tencent Holdings, China’s social media juggernaut that runs businesses from mobile gaming to fintech, and Meituan Dianping, the nation’s biggest online platform of food delivery and bookings, both climbed to their record highs last week in Hong Kong. The ChiNext index of technology-heavy smaller companies trading in Shenzhen also rose to its highest level in four years.

The renewed frenzy marks an ongoing shift in sentiment from the old-economy stocks engaged in traditional industries, which recently have attracted some buying after the US reopened its economy and China’s economy showed a nascent sign of a recovery.

Traders have been quick to pull out of traditional sectors, whose business strength is more closely linked to the economic swings, after the daily cases of new infectors rose to a record high following the lifting of lockdowns and an escalation of China-US tensions.

New-economy stocks stand to benefit in multiple scenarios, according to Union Bancaire Privée (UBP), a Switzerland-headquartered private bank and wealth management firm. If the hostility between Beijing and Washington continues to be dialled up, China will need to boost spending on new infrastructure projects ranging from 5G networks to internal data centres. Meanwhile, the threat of a fresh outbreak of Covid-19 would prompt investors to pile into the stocks to shield from the economic fallout, said Anthony Chan, chief investment strategist for Asia at UBP.