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Chinese tech-stock rebound meets extended cutbacks in price targets as MSCI index loses US$2.3 trillion of value this year

  • Analysts have continued to trim the upside potential of top tech stocks after the latest round of earnings reports
  • The MSCI China Index has corrected by 20 per cent this year, leaving investors US$2.3 trillion poorer

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The MSCI China Index, which counts Alibaba, Tencent and Meituan as the biggest among 744 constituents, has lost one-fifth of its value this year. Photo: Xinhua
A rebound in benchmarks tracking Chinese tech stocks in Hong Kong and New York suggests investors are relishing an end to a US$2.8 trillion sell-off over the past 17 months. Another round of price-target cuts may curb that enthusiasm.
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Analysts have trimmed the 12-month targets for the top 10 Hang Seng Tech Index heavyweights by 8.5 per cent on average since May 1 as the earnings season unfolded, according to Bloomberg data. That follows a 15 per cent cut in the first quarter this year.

They dialled back Alibaba Group Holding’s potential price upside by 4.8 per cent to HK$150.02 and Tencent Holdings’ potential by 8.7 per cent to HK$469.01 in the past one month. JD.com’s target was lowered by 3.6 per cent to HK$336.38.

The adjustments reflect a market suffering from weakening corporate earnings outlook as China trades growth for a zero-Covid policy to combat the Omicron wave. That no-nonsense approach has led to partial or total lockdown in 40 mainland cities including Shanghai and Shenzhen, slamming output and employment.

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“Strict Covid-19 restrictions are pushing earnings recovery further out into the second half and 2023, especially for consumption-related businesses like digital advertising and e-commerce,” said Vey-Sern Ling, senior Asia tech equity adviser at Union Bancaire Privee. “The situation can improve if the government announces strong stimulus measures.”

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