Exactly one year ago, I titled “Income to Growth rotation” for my GMC Nov 2019 updates. True enough, growth stocks had a spectacular run in the past year, led by technology sectors. The market valuation is near dot com bubble level. Is it a time for a change now?
In my last month’s update, I started saying to embrace the volatility amid the US election. As mentioned in my Telegram channel in early Nov, the market has already expected Biden’s sweeping win so there was no surprise.
What really shocked the market was not the US election result but China’s move to clamp down internet giants. To be more specific, China’s move was targeting more on the systematic financial risks brought by fintech and real estate sectors. China’s first antitrust rules sent the share prices of Alibaba, Tencent and Meituan tumbled. I believe this has an immediate impact on China’s investment.
Halting Ant Group’s IPO 2 days before its debut is not conventional. While the world has finally started to embrace China’s financial market. This sets a bad precedent. The capital market doesn’t appreciate such moves and it may dampen the enthusiasm of foreign capital to invest in China, or even Hong Kong’s stock market. However, it could be just China’s authority’s intention to preempt the market before the hot money is out of control. I had intended to overweight China technology companies, now we need to be more selective and observe further.The contents below are for Ivan's clients only.