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China Tech Stocks Plunge Amid Global Sell-Off: Investment Strategies and Expert Insights

Chinese tech stocks, including Tencent and Alibaba, fell sharply in Hong Kong last week, following U.S. market declines due to sentiment spillover and portfolio adjustments. Mainland investors bought these stocks at attractive valuations, with key ETFs like KWEB and KSTR showing reasonable multiples. Analysts highlight strong long-term growth in AI, semiconductors, and related sectors, supported by domestic substitution and global demand. Strategic partnerships, such as between Pony.AI and Moore Threads, underscore China's focus on local technology development. Experts remain optimistic about China's tech potential, citing low valuations and a expanding digital economy despite short-term volatility.

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China Tech Stocks Plunge Amid Global Sell-Off: Investment Strategies and Expert Insights

Last week, major Chinese technology stocks experienced significant declines in Hong Kong, mirroring a broader sell-off in U.S. tech peers, driven by sentiment spillover and portfolio rebalancing. Despite the downturn, mainland investors increased purchases of giants like Tencent and Alibaba, attracted by more favorable valuations.

Market Sell-Off Overview

  • Chinese tech stocks, including Tencent, Alibaba, SMIC, and Kuaishou, fell sharply in Hong Kong trading, pushing the sector index into bear market territory.
  • Over the past five trading days, chip manufacturers Hua Hong Semiconductor and SMIC lost nearly 15% and around 10% respectively.
  • Kuaishou declined by 11%, Tencent dropped approximately 9.5%, and Alibaba fell more than 8%.

Investor Actions and Valuation Analysis

  • Mainland China-based investors net bought Tencent and Alibaba on Wednesday and Thursday, per Wind Information data, highlighting a valuation gap with U.S. peers.
  • The KraneShares CSI China Internet ETF (KWEB) trades at a price-to-earnings ratio of 16x, while the KraneShares SSE STAR Market 50 Index ETF (KSTR) is at 45x, deemed reasonable given China's rapidly growing AI market.
  • Analysts note that China's tech valuations have not yet expanded to concerning levels, unlike some U.S. AI stocks.
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Expert Perspectives on Growth Sectors

  • Ding Wenjie of China Asset Management states that long-term drivers for chips and AI, such as domestic substitution and global computing demand, remain intact, with additional benefits for electrical equipment and materials sectors from AI capital expenditure cycles.
  • Brian Tycangco of Stansberry Research emphasizes that China's markets are in the early stages of a bull phase, with stable earnings expectations in tech despite macro softness.

Top Performers and Strategic Developments

  • In the STAR 50 Index, top gainers over five days included SICC (semiconductor materials), Roborock (vacuum robots), Supcon (AI industrial automation), and Transsion (smartphones), alongside solar-related stocks on potential Elon Musk deals.
  • Recent partnership: Robotaxi operator Pony.AI and chip maker Moore Threads announced a collaboration for autonomous driving technology, with both stocks slightly higher in Hong Kong trading.

2026 Outlook and Portfolio Shifts

  • Raffles Family Office's 2026 investment outlook cites low expectations and attractive valuations for China/Hong Kong tech stocks, noting rapid expansion of China's digital economy and AI ecosystem.
  • The firm's asset allocation strategy shows increased exposure to China and Hong Kong equities while reducing U.S. large-cap holdings, reflecting constructive views on selective opportunities aligned with policy and innovation trends.
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