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Why payments will help drive China’s Big Tech

Assif Shameen
Assif Shameen4/23/2018 08:00 AM GMT+08  • 11 min read
Why payments will help drive China’s Big Tech
SINGAPORE (Apr 23): 2017 was the Year of China Tech. Global investors helped drive Chinese tech stocks 70% higher last year, with shares of the two internet giants, Tencent Holdings and Alibaba Group Holding, more than doubling as they chased highgrowth t
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SINGAPORE (Apr 23): 2017 was the Year of China Tech. Global investors helped drive Chinese tech stocks 70% higher last year, with shares of the two internet giants, Tencent Holdings and Alibaba Group Holding, more than doubling as they chased highgrowth tech plays. More recently, though, investors have been less enamoured with the duo as well as Baidu, JD.com and other Chinese tech stocks. From their peak in late January to the trough earlier this month, large Chinese tech stocks were down nearly 15%, with Alibaba 19% lower. Although they rebounded recently, most are way below their January peak.

So, what has changed? Is it just the sentiment towards Chinese stocks in the aftermath of US President Donald Trump’s tough talk on trade and tariffs as well as his vow to clamp down on intellectual property violations by Chinese companies? Or are fundamentals, such as margin pressures and a slower pace of earnings growth from the robust levels of last year, a factor? “It is only natural that there was some profit- taking given how well Chinese internet stocks have performed over the past two years,” Oliver Cox, portfolio manager for JPMorgan Asset Management in Hong Kong, who runs the firm’s Pacific Technology Fund, tells The Edge Singapore in a recent interview.

China tech stocks are not alone in feeling suddenly unloved by global investors. Trump’s tweets about e-commerce giant Amazon.com, the sight of Facebook co-founder Mark Zuckerberg being forced to testify before the US Congress and Washington’s attempt to regulate search giant Google’s parent Alphabet have all weighed on the global tech sector. Yet, while an aggressive pushback against the erosion of privacy as well as monetisation of data in the aftermath of recent Facebook revelations has impacted US tech giants, Chinese internet firms are continuing to grow at a much faster pace than their US peers and are also able to harness the data more powerfully.

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