Alibaba May Be Seeing Tough Times But, Alongside Tencent, Remains 'The Benchmark' For Chinese Tech Stocks: Analyst

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Alibaba Group Holding (NYSE:BABA) and Tencent Holdings (OTC:TCEHY) continue to be the “benchmark” for Chinese technology stocks despite mounting state pressure on its big internet firms, Amber Hill Capital’s asset management director Jackson Wong told CNBC

What Happened: Wong’s family and Amber Hill, who both own shares in the two companies, continue to remain bullish on the stalwarts, which they see together as “the benchmark” among China’s tech stocks.

Chinese tech stocks in Hong Kong have lagged the other sectors so far in 2021, according to the CNBC report, which adds that the top 10 constituents of the Hang Seng index did not include a single tech stock at the end of the first quarter.

The tech sector usually constitutes more than 42% of Hong Kong’s benchmark index. Its poor performance is attributed to rising bond yields, which hurts growth stocks such as technology as they reduce the relative value of earnings. 

Why It Matters: A growing number of  Chinese tech shares that are also listed in the U.S. have taken a beating this year, amid fears that a new U.S. law could stop the trading of securities that do not comply with the Securities and Exchange Commission rules.

Investors are also spooked over China’s regulatory crackdown on the sector. Alibaba-owned Ant Group’s IPO plans were shelved in 2020, which otherwise would have been the biggest IPO in history. 

See Also: Ant Group Can Resume IPO Plans Once Problems Solved: Chinese Central Bank

Wong believes the profit outlook for two internet companies could take a hit due to the political headwinds and potential regulatory rules but expects “some kind of compromise” to be eventually reached on the regulatory front.  

Price Action: Alibaba shares closed 1.11% lower at $224.36 on Monday, and those of Tencent were up 5.06% at $83.84, on Thursday. 

Read Next: Why Pinduoduo Could Be ‘Primary Beneficiary’ Of Alibaba’s China Regulatory Misfortunes

Photo courtesy: Alibaba

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