A Quick Note On The Chinese Tech Stock Selloff

Morning Report: Chinese tech stocks are under pressure, but it’s worth noting that the recent selloff isn’t existential.

Good morning from the rainy East Coast. Let’s talk about Chinese stocks.

Several recent media reports detail a selloff of Chinese technology shares. Earlier this week, MarketsInsider wrote, “Chinese tech stocks are sinking after report says the Treasury Department is looking to block Chinese companies from investing in US companies involved with ‘industrially significant technology’,” and yesterday Bloomberg reported that “A Chinese Tech Wreck Is Crushing Emerging-Market Stocks.”

Between the two, it felt like a good moment to take a look. Bloomberg’s piece notes that poor Chinese tech stock performance is dragging down some emerging market indices. To understand the changes, we’ll need a basket of stocks to observe. Happily, MarketsInsider drills into a particular ETF to track the performance of Chinese tech stocks.

Namely, it raised the Invesco China Technology ETF. Per Invesco itself, the ETF is “designed to measure and monitor the performance of the universe of publicly-traded information technology companies open to foreign investment which are based in China, Hong Kong or Macau.” That’s reasonable and will serve our needs.

Now, to the data. Chinese tech stocks are selling off. In the last month, for example, the ETF rose from $58.51 to over $61, only to fall in recent days to around $54. That’s steep enough. Even more, the ETF’s 52-week high of $67.24 gives the ETF a decline of just under 20 percent, as of its last price data.

However, the index is up over 14 percent over the last 12 months. So despite the recent selloff, Chinese tech stocks are up over the last year. And the ETF is trading in the range of all-time highs since its creation after the 2008 economic recession.

So it is accurate to point out that Chinese tech stocks are under pressure at the moment. But bear in mind that things aren’t as bad as the last month’s chart might have you think.

Finally, why do we care? Because as the public tech stocks domestically help set valuation ranges for private tech companies, the same is likely true in China. And if the Chinese markets slip dramatically, the movements could dampen the incredibly active Chinese startup sector.