JP Morgan, in a report on March 14, essentially called Chinese stocks “un-investible”. The US investment bank said that “broad-based concern about China’s geopolitical risks has triggered investors with a global mandate to sharply reduce their exposures” to the Chinese tech sector as the Russia-Ukraine conflict continues. It advised investors to “avoid China Internet” stocks on a six to 12-month view.
After weeks in correction territory, global stock markets rebounded strongly on March 16 as the US Federal Reserve raised interest rates for the first time since the pandemic started, and laid out a clear path to 10 more hikes over the next 21 months. The biggest gainers of the day were beaten-down Chinese stocks, particularly those facing delisting from US exchanges and had nothing to do with the US Fed or interest rate hikes. KraneShares CSI China Internet Index ETF, better known by its ticker symbol KWEB and which represents a broad swath of tech stocks, was up 39.7%, while video gaming giant Tencent Holdings shares surged 33.4%, e-commerce player JD.com 39.4%, search engine operator Baidu 39.2% and Internet giant Alibaba Group Holding was up 36.7%.
Having plunged between 50% and 70% over the past 15 months, Chinese tech stocks were headed for a steeper and more slippery slope as regulators in Beijing and Washington DC tightened listing rules and as the US distanced itself from China, which had not condemned Russian leader Vladimir Putin’s decision to attack Ukraine last month. Wall Street firms had rushed to dramatically downgrade China tech stocks to “hold” or “sell”.
