REGULATORY CRACKDOWN?
There have been roller-coaster rides for the past few weeks in most of the Chinese technology stocks price. The free fall of stock price of some Chinese technology companies had prompted panic among investors to consider longer-term ramifications of such crackdown. TENCENT HOLDINGS Early August 2021, stock price of Tencent fell further in fear of further tightening on the gaming sector after Chinese state media decried the “spiritual opium” of games. Subsequently Tencent fell as much as 11% after an outlet run by the Xinhua News Agency published a blistering critique of the industry. Though the online link to the post was removed hours later and then restored to the paper’s website later in the day but with narcotics references stripped out. Tencent reacted quickly and pledged to limit play time for minors (limit its play time to an hour during weekdays and not more than two (2) hours during vacations and holidays). It also plans to forbid in-game purchases for gamers under 12-year-olds. MY TAKE 1. The investing landscape may have changed. Whether you like it or not, a major shift is under way in China as the Chinese government pushes for a reform in a positive manner aimed for a greater China. 2. China and USA rivalry is going to affect the cross-border listings of Chinese companies on USA equity markets. This may not be too positive for the investor but I personally think that Chinese companies may list its entity (IPO) in Hong Kong to avoid any geopolitical tension. Do not forget that Hong Kong is uniquely positioned as the key gateway between China and the international markets. 3. Having said that, a diversified portfolio should hold Chinese technology stocks even if it goes through some pain in the short term. 4. Looking back at my investment philosophy and strategy, my timeframe is long term – 5 to 10 years or more. So, I am comfortable to allocation certain percentage of cash towards companies such as $0700.HK (Tencent) TENCENT, $BABA (Alibaba) ALIBABA and $03690.HK (Meituan Class B) MEITUAN for the next few weeks (or months). I rather sleep comfortably at night, knowing that my portfolio is built sufficiently diversified to lower the risk of losing everything. SIDE NOTE Last weekend, l came across an article written by RAY DALIO titled: Understanding China’s Recent Moves in Its Capital Markets. I think everyone should read it as he provides a very thoughtful insights of the recent moves in China’s capital markets. I will provide the link below. www.linkedin.com/pulse/understanding-chinas-recent-moves-its-capital-markets-ray-dalio/ PORTFOLIO PERFORMANCE My portfolio for current month of August is very volatile mainly due to the Chinese tech companies stock crash. Since the inception of our fund in May 2020, we have been up close to 43.27%. We are still able to maintain our risk level at 3 as can be seen from the “average risk score”. Stay safe.MNMLH
09.08.2021
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