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Are Tanking Chinese Tech Stocks Now a Bargain for Global Investors?

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China's Stocks Tumble as Markets Reopen After Week-long Holiday

The sharp drop in the value of Chinese tech stocks will be seen as a major buying opportunity for some investors, but they must exercise extreme caution, warns the CEO of one of the world’s largest independent financial advisory, asset manager and fintech organizations.

The warning from Nigel Green, chief executive and founder of deVere Group, comes as fears mount over a regulatory crackdown by the Chinese government.

In the third day of plummeting values for China’s tech giants, Tencent’s shares lost 10%, Alibaba dropped 7.7%, JD.com shed 8.9% and Meituan fell 17%.

Hong Kong’s Hang Seng benchmark was down more than 5% on Tuesday. Meanwhile, in mainland China, the CSI 300 index of Shanghai and Shenzhen-listed stocks lost 3.5%.

The sharp sell-off in Chinese and Hong Kong shares spilled over into European markets and Wall Street futures are pointing to a lower open.

Mr Green notes: “Chinese tech stocks were dropping again on Tuesday for the third consecutive session as markets become increasingly jittery over concerns of a regulatory crackdown by Beijing.

“The sell-off has been focused on China’s $100 billion private education industry following a leaked government memo highlighting incoming new, tougher severe regulations which will prevent companies in the sector accepting foreign investments, raising capital through the stock market, or teaching outside school hours, amongst other rules.

“This tough new approach being taken by Beijing has spooked the tech sector which is already on high alert amid fears that the government wants more control over private enterprise.

“The effect has been wiping hundreds of billions of market value from China’s largest tech giants.”

He continues: “It can be expected that some investors will swoop in and view these events as a major buying opportunity; as a chance to top-up their portfolios within the booming Chinese economy.

“They may have a point – these shares do look like bargains.

“However, they must exercise extreme caution as the situation remains highly unpredictable and any further similar actions – or even suggestions – from Beijing will mean more, sustained volatility and sell-offs.

“It could be a long time until there is clarity.”

A good fund manager, says the deVere boss, will help investors seize the opportunities and sidestep the risks by seeking out the inevitable winners and losers from the Chinese government’s possible regulatory crackdown.

“As always, investors should be as diversified as possible in order to maximize returns relative to risk. This means geographical, sector and asset class diversification.”

Mr Green concludes: “As China rolls out another round of regulatory tightening, global stock markets will be impacted, and investors must tread carefully to avoid unnecessary risks and to capitalize on the potential opportunities.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Bonds

$4 Billion Eurobond to Deepen External Reserves, Build Confidence in Medium-term – Ecobank CEO

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Eurobonds - Investorsking

The Cheif Executive Officer and Managing Director of Ecobnak Nigeria, Patrick Akinwuntan, has said the recent $4 billion Eurobond issued by the Federal Government of Nigeria will deepen external reserves and allows more confidence in the medium-term planning in the private sector.

Akinwuntan, who was assessing the global market as Nigeria announced its multibillion dollar Eurobond offering, during an interview on Arise TV in Lagos, said such loans would give a fresh breath to the economy because when the country takes on Euro bond that portion is reduced from its financing or public sector debt.

He advised those approaching the international debt market to have clarity of purpose and state their strengths and weaknesses.

Akinwuntan said the economy is showing strong trends owing to investments in infrastructure such as road and rail transportation, which is giving a lot of positive impact to the economy, adding that the private sector is also making improvements in power sector, telecoms, and information technology.

He said: “In the last two quarters, we have seen the global market rebounding from the very deep end of the COVID-19 that plagued 2020. We have seen, since the arrival of vaccines, the gradual opening of the global economy such that there is much more optimism in the market because we have learnt that shutting down the economy is not the best way to handle an epidemic and we have seen support from sovereigns, ensuring that there is steady growth within the various economies; supply chain has opened and we have seen in sub-Sahara Africa renewed interest in the Eurobond market in the international debt market. We have seen Benin republic, Ghana, Cote d’ivoire and Kenya all are approaching the market with significant success.

“Over subscription in each of them ranges from 200 per cent to 300 per cent and an all-high in Kenya close to 600 per cent or six times over subscription. This is a positive period for major economies like Nigeria, which is the lead economy in Africa, to take advantage and invite the global community to hear our story, invest in us and get good returns.”

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Nigerian Stock Exchange

Equity Investors Gain N10 Billion Last Week

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stock bull - Investors King

Investors at the Nigerian Exchange Limited gained N10 billion last week despite losing for three consecutive days.

Investors traded 1.290 billion shares worth N13.921 billion in 16,745 deals on the floor of the Exchange, in contrast to a total of 856.289 million shares valued at N10.752 billion that exchanged hands in 15,663 transactions in the previous week.

In terms of volume traded, the Financial Services Industry led the activity chart with 978.172 million shares valued at N8.300 billion traded in 8,716 deals. Therefore, contributing 75.80 percent and 59.62 percent to the total equity turnover volume and value respectively.

The Consumer Goods Industry followed with 62.006 million shares worth N1.187 billion in 2,546 deals. In the third place
was Conglomerates Industry, with a turnover of 49.055 million shares worth N126.288 million in 589 deals.

FBN Holdings Plc, United Bank For Africa Plc and Guaranty Trust Holding Company Plc were the three most traded equities, accounting for a combined 626.958 million shares worth N5.766 billion in 2,526 transactions and contributed 48.58 percent and 41.42 percent to the total equity turnover volume and value, respectively.

The NGX All-Share Index appreciated by 18.41 index points or 0.05 percent from 38,943.87 index points recorded in the previous week to 38,962.28 index point last week. Market Capitalization also appreciated by 0.05 percent or N10 billion to close N20.300 trillion, up from N20.290 trillion.

Similarly, all other indices finished higher with the exception of NGX 30, NGX CG, NGX Banking, NGX Pension, NGX-AFR Bank Value, NGX AFR Div Yield, NGX MERI Value and NGX Consumer Goods indices which depreciated by 0.04 percent, 0.36 percent, 0.43 percent, 0.05 percent, 0.72 percent, 0.50 percent, 0.75 percent and 0.04 percent, respectively. While the NGX ASeM, NGX Growth and NGX Sovereign Bond Indices closed flat.

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Bonds

MTN Nigeria to Raise N89.9 Billion Via Bond Issuance

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MTN Nigeria - Investors King

MTN Nigeria Communications Plc (MTN Nigeria) has announced plancs to raise another N89.999 billion through bond issuance under its N200 billion registered shelf programme.

The telecommunications giant stated in a note to the Nigerian Exchange Limited and investing public.

MTN Nigeria said “an application has been submitted to the Securities and Exchange Commission (SEC) for the clearance of transaction documents for MTN Nigeria’s proposed bond issuance valued at N89,999,000,000; Series 2 of the N200,000,000,000 registered shelf programme.”

The telecom company had successfully raised N110,001,000,000 through Series 1 bond in the month of May 2021.

However, it said the final decision on the launch of the Series 2 bond will be taken once all regulatory approvals are obtained, and the investing public will be duly notified.

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