Shanghai reopening: tech stocks in Hong Kong are worth a punt as China passes short-term peak Covid-19 pain, Alpine Macro says
- Chinese tech companies are likely trading at trough earnings with trough multiples, the research firm said in a report published on Tuesday
- The firm recommended a long position on the Hang Seng Tech Index, but cautioned that existing earnings expectations are “unrealistically benign”
China’s biggest tech stocks in Hong Kong are worth a punt as the nation’s stringent zero-Covid policy “has passed its near-term peak and some common-sense pragmatism” will begin to manifest, according to Alpine Macro.
The Montreal-based research firm recommended opening a speculative long position on the Hang Seng Tech Index as a way to bet on the phasing out of China’s zero-Covid restrictions and a gradual recovery in business activity.
“Chinese tech companies are likely trading at trough earnings with trough multiples,” Yan Wang, chief emerging markets and China strategist, wrote in a report published on Tuesday. “Investors’ near unanimously bearish sentiment on this sector also means that the sell-off pressure has been largely exhausted, further limiting downside risks.”
Chinese tech stocks also look cheap, having fallen over 60 per cent from their February 2021 peak. Hang Seng Tech Index members trade at about 10 times price-earnings ratio, compared with almost 40 times for stocks in the Nasdaq Composite Index, or about nine times the broader Hong Kong market.