Beaten-Down Tech Stocks With Strong Prospects
The $1.48 billion JPMorgan Pacific Technology Fund is growing its exposure to tech giants whose valuations have been hit by an antitrust crackdown in China.
The fund’s moves are at odds with several asset managers, including BlackRock Inc., who have become more cautious with China's largest internet companies. However, JPMorgan thinks that the Chinese regulatory cycle could be ending once the key industry players agree on what measures need to be taken.
“The perception that the Chinese government is out to break them up or reduce them is the wrong way to think about what they are doing with this group, […] They are a very pragmatic regulator” Oliver Cox, by Chia Woon Eunice Chua and Ishika Mookerjee for Bloomberg
Cox, who helps manage JPMorgan’s fund see enterprise software, e-commerce, leading chipmakers and gaming stocks as the best themes to invest in Asia.
- China’s technology stocks have been pressured by political hurdles as the governing party tries to reign in the power of its own tech giants
- We believe that the technology-crackdown driven by the government in the last months is temporary and not meant to break China’s champions
- Investors should also consider the risk of inflationary pressures that comes with the rise of its middle class
- However, inflation concerns regarding factory output in China could largely be transitory as problems may be concentrated in global shipping and the initial hurdles linked to a post-pandemic restart of the global economy
- China’s technology champions are, for the most part, showing healthy growth rates, stable margins and growing influence over China’s neighbour (Southeast Asia and Europe)
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