China’s crackdown on its internet giants fuels demand for its onshore tech stocks

Technology stocks have largely been shielded from Beijing’s clampdown, as they are engaged in businesses that are underpinned by policy support

Cut in banks’ reserve requirement ratio may further aid Chinese technology stocks trading onshore, according to brokerages

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The ChiNext index of small companies rose to a six-year high last week in Shenzhen. Photo: Xinhua

Published: 2:31pm, 19 Jul 2021Updated: 9:54pm, 19 Jul 2021

China’s waves of crackdown against its biggest internet companies are fuelling demand for technology stocks – a group that has so far remained untouched by the regulatory storm – in its onshore markets.

While trades linked to the likes of Alibaba Group Holding, Tencent Holdings and Meituan have been unwinding in Hong Kong this year, gauges tracking mainland China-listed technology stocks have been on a stellar run. The ChiNext index of small companies rose to a six-year high last week in Shenzhen, and a gauge tracking the 50 most valuable companies on Shanghai’s technology-heavy Star Market touched its highest level in a year this month.

Traders have been turning to onshore listed technology companies as an alternative to the fast-growing part of the economy represented by Alibaba and Tencent. One advantage is that the technology stocks have largely been shielded from Beijing’s clampdown, which is targeting monopolistic practices and cybersecurity, as they are engaged in businesses ranging from new energy to chip making and electronics that are underpinned by policy support.

Clean energy is crucial to President Xi Jinping’s goal of cutting carbon emissions to zero by 2060, and semiconductors is a field where Beijing has called for self-sufficiency to counter a US technology blackout.

The ChiNext and Star Market “are benefiting”, said Hong Hao, managing director with Bocom International Holdings in Hong Kong. “The names trading there are not available in Hong Kong or overseas. And these names are part of the key ‘hardware manufacturing’ strategy going forward,” he said.

While it is generally believed that China’s best technology companies are listed overseas, some of their onshore listed peers have of late grown big enough to challenge giants in traditional industries. For instance, two ChiNext-listed companies are now among the top 10 companies on the mainland’s exchanges. Contemporary Amperex Technology, a maker of lithium batteries that supplies to Tesla, is now among the four largest companies on the Shanghai and Shenzhen exchanges, capitalising at 1.2 trillion yuan (US$185.2 billion). Its market cap is bigger than Ping An Insurance Group’s and PetroChina’s.

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