The Edge Singapore Thu, Jun 23, 2022
Chinese President Xi Jinping chaired a meeting on June 22 that approved promotion of healthy development of the payment and fintech sectors, according to a Bloomberg report.
“This is a sign that the crackdown on tech companies like Ant Group could be easing,” suggests Lim & Tan in a June 23 report.
Lim & Tan writes that as part of the plans, China would ensure the security of payment and financial infrastructure, and work to prevent and diffuse systemic financial risks, CCTV said. The government will also enhance oversight of financial holding companies and financial institutions by platform financial firms, the Bloomberg report said.
According to Bloomberg, Beijing has promised to unwind crackdowns that torpedoed Ant’s record IPO in 2020 and ensnared every sector from online education to gaming.
“A meaningful relaxation of curbs on Ant — one of the most high-profile casualties of Xi’s sweeping clampdown — would send a powerful signal that policymakers are following through on recent pledges to support the industry,” Lim & Tan says.
“The Communist Party’s evolving stance toward the private sector has become one of the most closely watched developments in global markets in recent years, with some observers even calling China’s sprawling Internet sector uninvestable,” Lim & Tan adds.
A proxy to any recovery in beaten-down Chinese tech stocks is the Lion-OCBC Securities Hang Seng Tech ETF (HST), priced in Singapore dollars.
“We note that the constituents of the Lion-OCBC Securities HST ETF includes Xiaomi Corp, Kuaishou Technology, Meituan, Alibaba Group, JD.com, Tencent Holdings, etc. Given that the Chinese president is promoting the “healthy” development of the payment and fintech sectors… we thus believe that there could be a positive knee-jerk reaction in [HST]. At $0.783, the market cap of [HST] is $317.8 million and its P/B is 1.0x,” Lim & Tan says.
Technically, for HST, 78 cents represents the neckline of a base. While HST is struggling a trifle to emerge from this base formation, its share price continues to hold above the 100-day moving average currently also at 78 cents. If HST is able to hold above this level this week (June 20–24), it should be able to build on its rising quarterly momentum to stage a break above 78 cents. Such a breakout indicates a target of almost $1. This target is achievable given that HST started trading at around $1.36 when it first listed in December 2020. Support should be kept close by at 76 cents.
Another Chinese tech-related ETF has had better luck than HST — the NikkoAM-Straits Trading MSCI China Electric Vehicles and Future Mobility ETF (EVS), also priced in Singapore dollars. It has outperformed the Straits Times Index and the Hang Seng Tech Index. In the short term though, a small black body coupled with a smallish gravestone doji may cause a temporary correction. The range is likely to be narrow, with support at 89 cents and resistance at 92 cents. The year’s high was at EVS’s listing price of 96.4 cents, although it made an intra-day high of $1. Its NAV as at June 17 stood at 85.5 cents.
EVS tracks the MSCI China All Shares IMI Future Mobility Top 50 Index. This MSCI Index in turn aims to track the performance of top 50 largest Chinese companies listed mainly in US, Hong Kong and China, that are expected to derive significant revenues from energy storage technologies (including electric vehicles), autonomous vehicles, shared mobility and new transportation methods. The index is diversified, with the weighting of each company in it limited to 10%.
The Mobility Index’s largest constituents include Contemporary Amplenex Technology, Nio, BYD, Geely Automobile Holdings, Li Auto, Tianqi Lithium, Jianqi Ganfeng Lithium, and Yunnan Energy.