A year ago, a technology index was launched in Hong Kong so that investors could invest in big tech companies in China, but now the index is performing among the worst in the world. The reason behind this is China itself and its policies. The Hang Seng Tech Index has seen a lot of ups and downs in the last 12 months.
According to online media reports, the index completed one year since its launch yesterday. It was up 59% from its February peak, but has since lost more than $551 billion in market value amid Beijing’s dominance of the sector.
The profits of Hong Kong’s IT index have declined to just 6 per cent. In comparison, the MSCI World Information Technology Index and the NASDAQ-100 Index have given returns of over 40 per cent. Not only this, China’s tech index has also lagged behind ChiNext. The ChiNext index has given returns of up to 35% during this period.
Such poor performance exposes regulatory risks for one of the fastest growing sectors of China’s economy. Jack Ma’s Ant Group Co. and Didi Global Inc. Beijing’s tough measures to rein in the country’s powerful tech firms have sparked a concern among global investors. On the other hand, its relations with America also remain difficult.
“There are concerns at the moment that their data exceeding the public interest could impact mid-term earnings power and privacy remains an issue,” said Joshua Crabb, portfolio manager at Robeco Hong Kong Ltd.
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Strategists at Bank of America Corp wrote in a note last week that regulatory pressure is unlikely to end anytime soon, instead recommending investors invest in tech firms outside of China.
Launched last year, the index tracks the 30 largest Hong Kong-listed tech firms, including giants such as Tencent Holdings Ltd, Alibaba Group Holding Ltd and Meituan.
This came at a time when Chinese tech companies were looking to be listed in a index closer to their own than in other countries, as rising tensions between Washington and Beijing risked reducing these companies’ access to US capital markets. was extended.
The index fell 11% this month after China ordered a ban on new users from downloading Didi’s app. People familiar with the matter said the regulator is also considering penalties for a company that starts after a controversial IPO.