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China's Tech Stocks Mired in Trade & Other Woes: What Next?
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On Aug 23, Alibaba Group Holding Limited (BABA - Free Report) reported lower-than-expected earnings. This resulted in shares of U.S.-listed Chinese tech companies plummeting on Thursday. Chinese tech companies have been suffering since the beginning of the year, having lost billions of dollars in market value.
Investors’ concerns over a slowdown in Chinese economy, has been taking a toll on these stocks. Moreover, trade disputes with the United States too have also been weighing on Chinese tech stocks, at a time when China is trying to build up with own tech industries.
U.S.-listed Chinese Tech Stocks Suffer
On Aug 23, Alibaba reported fiscal first-quarter 2019 earnings of 66 cents per share, missing the Zacks Consensus Estimate of 74 cents per share. The company also said that its profit growth might slow down in the near term owing to investments in new businesses. This saw the U.S. listed shares of Alibaba declining 3.2%.
Alibaba’s share price plunge had a domino effect, which saw shares of other U.S-listed Chinese tech companies plummeting as well. Shares of Baidu, Inc. (BIDU - Free Report) and JD.com, Inc. (JD - Free Report) declined 1.7% and 2.9%, respectively. Also, shares of NetEase, Inc. NTSE Vipshop Holdings Limited (VIPS - Free Report) plummeted 2.5% and 4.1%, respectively. JD.com has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Chinese tech stocks too had been performing well till the end of 2017. In fact, at one point of time in 2017 Tencent Holdings Limited (TCEHY - Free Report) had surpassed Facebook, Inc. in market value. However, in the second quarter, Tencent reported a drop in profit for the first time in more than a decade, as it cited difficulties with its video game business. Since January, the company has lost more than $160 billion in market value.
Slowing Economy, Trade War Hit Chinese Tech Stocks
A major reason behind the poor show by Chinese tech companies has been the broader concern of China’s slowing economy. The Chinese economy witnessed robust growth of 6.9% in 2017. The momentum continued at the beginning of 2018 but economists believe that signs of a slowdown have started showing. The Shanghai Composite Index has declined 17.1% from its January peak.
Moreover, tech companies have been playing an important role in the escalating trade dispute between the United States and China. In February, President Donald Trump accused China of unfair trade practices to acquire foreign technology and intellectual property theft. Since then, a round of tariffs and retaliatory tariffs has been announced by both countries.
On Aug 23, the United States implemented another round of tariffs on $16 billion worth of Chinese goods. Moreover, the Trump administration’s increasing scrutiny on direct investments in the U.S. tech sector by Chinese companies has built up further pressure on the latter, leading to huge selloffs. Year to date, shares of JD.com, Tencent, Alibaba and BIDU have plummeted 27.5%, 17.7%, 6.2% and 9.5%, respectively.
U.S. Tech Companies in Safer Space
After a robust 2017, U.S. tech companies had started 2018 on a high note. However, trade war fears have been taking a toll on U.S. tech companies too. Although shares of U.S. tech giants like Facebook and Netflix, Inc. (NFLX - Free Report) have taken a beating in recent times, tech stocks have been driving markets this year too.
The Technology Select Sector SPDR (XLK) has gained 13.6% year to date. Shares of tech giants Apple, Inc (AAPL - Free Report) , Alphabet, Inc (GOOGL - Free Report) , Amazon.com, Inc. (AMZN - Free Report) and Netflix have increased 25.1%, 11.9%, 60% and 76.7%, respectively. Understandably, U.S. tech companies are in a relatively safer space amid this trade war, as China so far has been targeting the United States with tariffs on commodities that include agricultural goods and industrials. Given China’s current ambition of building up its own tech industry, it is perhaps unlikely to mess with the ruling U.S. tech titans.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions. New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
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China's Tech Stocks Mired in Trade & Other Woes: What Next?
On Aug 23, Alibaba Group Holding Limited (BABA - Free Report) reported lower-than-expected earnings. This resulted in shares of U.S.-listed Chinese tech companies plummeting on Thursday. Chinese tech companies have been suffering since the beginning of the year, having lost billions of dollars in market value.
Investors’ concerns over a slowdown in Chinese economy, has been taking a toll on these stocks. Moreover, trade disputes with the United States too have also been weighing on Chinese tech stocks, at a time when China is trying to build up with own tech industries.
U.S.-listed Chinese Tech Stocks Suffer
On Aug 23, Alibaba reported fiscal first-quarter 2019 earnings of 66 cents per share, missing the Zacks Consensus Estimate of 74 cents per share. The company also said that its profit growth might slow down in the near term owing to investments in new businesses. This saw the U.S. listed shares of Alibaba declining 3.2%.
Alibaba’s share price plunge had a domino effect, which saw shares of other U.S-listed Chinese tech companies plummeting as well. Shares of Baidu, Inc. (BIDU - Free Report) and JD.com, Inc. (JD - Free Report) declined 1.7% and 2.9%, respectively. Also, shares of NetEase, Inc. NTSE Vipshop Holdings Limited (VIPS - Free Report) plummeted 2.5% and 4.1%, respectively. JD.com has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Chinese tech stocks too had been performing well till the end of 2017. In fact, at one point of time in 2017 Tencent Holdings Limited (TCEHY - Free Report) had surpassed Facebook, Inc. in market value. However, in the second quarter, Tencent reported a drop in profit for the first time in more than a decade, as it cited difficulties with its video game business. Since January, the company has lost more than $160 billion in market value.
Slowing Economy, Trade War Hit Chinese Tech Stocks
A major reason behind the poor show by Chinese tech companies has been the broader concern of China’s slowing economy. The Chinese economy witnessed robust growth of 6.9% in 2017. The momentum continued at the beginning of 2018 but economists believe that signs of a slowdown have started showing. The Shanghai Composite Index has declined 17.1% from its January peak.
Moreover, tech companies have been playing an important role in the escalating trade dispute between the United States and China. In February, President Donald Trump accused China of unfair trade practices to acquire foreign technology and intellectual property theft. Since then, a round of tariffs and retaliatory tariffs has been announced by both countries.
On Aug 23, the United States implemented another round of tariffs on $16 billion worth of Chinese goods. Moreover, the Trump administration’s increasing scrutiny on direct investments in the U.S. tech sector by Chinese companies has built up further pressure on the latter, leading to huge selloffs. Year to date, shares of JD.com, Tencent, Alibaba and BIDU have plummeted 27.5%, 17.7%, 6.2% and 9.5%, respectively.
U.S. Tech Companies in Safer Space
After a robust 2017, U.S. tech companies had started 2018 on a high note. However, trade war fears have been taking a toll on U.S. tech companies too. Although shares of U.S. tech giants like Facebook and Netflix, Inc. (NFLX - Free Report) have taken a beating in recent times, tech stocks have been driving markets this year too.
The Technology Select Sector SPDR (XLK) has gained 13.6% year to date. Shares of tech giants Apple, Inc (AAPL - Free Report) , Alphabet, Inc (GOOGL - Free Report) , Amazon.com, Inc. (AMZN - Free Report) and Netflix have increased 25.1%, 11.9%, 60% and 76.7%, respectively. Understandably, U.S. tech companies are in a relatively safer space amid this trade war, as China so far has been targeting the United States with tariffs on commodities that include agricultural goods and industrials. Given China’s current ambition of building up its own tech industry, it is perhaps unlikely to mess with the ruling U.S. tech titans.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions. New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>