On 27.07.2021, the Heng Seng Tech Index was down 8%. $9988.HK (Alibaba Group Holding Ltd (Hong Kong)) was down 5% and Tencent was not spared as well, was down 10%. The following day, the downtrend continued.
If you compare the peak of Tencent at HKD757.00 with the current price of HKD446.00, you can feel is crash is real and solid. About 41% of its market capital has been vanished from the crash. The peak of $03690.HK (Meituan Class B) (in February 2021) at HKD445.00 and current stock price at HKD194.00, more than 50% of its market capital has been wipe out. This is quite a madness to me. Is it over for Chinese tech stocks? Well, I do not think so. I still stand by my opinion as per my Memo dated 09.07.2021. Thus, I have added a few positions to my current portfolio. There are:- 1. $BABA (Alibaba) 2. $0700.HK (Tencent) My reasons are simple. 1. I want to take this advantage of the permissive sentiment on the Chinese tech market. Lately, regulatory scrutiny in China over the issues of anti-trust law and crack down on big technology companies had sent the share price of some big tech companies into downtrend. But I do not see this as a long-term issue with them. 2. Yes, Chinese government may have been tightening the rules on all Chinese tech companies, but what I see here is that such regulatory control (such as improve in social security or working condition, anti-competition) is beneficial to all the Chinese community, consumers and small businesses as a whole. It actually forces the companies to enhance its services and platform. In the long run, the business of the tech companies can grow in a positive way. 3. Why Alibaba? It is simple, you can refer to my MEMO dated 14.06.2021. Cloud business in Alibaba is still growing, and it is not show any sign of stopping. 4. Why Tencent? The gaming business is booming and, from the past records, Tencent is in decently high profit margin businesses. RISK Not that investing in those companies are completely risk free. Risks always existed in investment, especially investing in the above-mentioned companies. Can the stock price of those companies crash further? Will they rebound to its peak again? What is the bottom price? When to buy? When to sell? Is this an opportunity to buy? I have no answer to all of the above questions because I do not know. What I know is that I am comfortable (within my financial ability) to add some positions to the above-mentioned companies, by not holding too much cash, for now. PORTFOLIO PERFORMANCE As of today, my portfolio for current month of July is down 3.51% mainly due to the Chinese tech companies stock crash. Since the inception of our fund in May 2020, we have been up close to 48.66%. We are still able to maintain our risk level at 4 as can be seen from the “average risk score”. Stay safe. Norman Liew MNMLH 30.07.2021
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