Investment capital will continue to flow strongly into the Chinese technology sector


China will likely remain tight-lipped on technology companies for decades to come, but that shouldn’t stop long-term investors from pumping money into the sector.

Netease logo at ChinaJoy Digital Entertainment Expo held in Shanghai, China on June 30, 2021. Photo: Reuters

Tariq Dennison, director of asset management at GFM Asset Management Fund (Hong Kong, China) made the above comment in the context that the cash flow to invest in stocks of many Chinese technology giants still remains. increased, despite tightening regulations on the technology sector.

“If you ask me, I would say this will last at least 20 or 30 years,” Tariq Dennison predicts on CNBC about the length of time China will tighten regulations on tech businesses. .

“All of this has happened in phases – look how far regulation has come for technology in just the last 30 years,” noted GFM Asset Management. “These things may look like they happened step by step, but there are many steps along a very long road,” the expert said.

However, Mr Tariq Dennison doesn’t think long-term investors will therefore falter in the face of an attractive Chinese tech market, but many uncertainties remain.

“Now I can say, really and more Long-term capital is pouring into shares of Baidu, Alibaba, Tencent, and JD because investors are focused on long-term prospects,” said Tariq Dennison, which is often less speculative.

Investment in the Chinese technology industry promises to continue to increase in the near future when mobile game developer NetEase recently announced that it is about to offer an initial public offering (IPO) of the Chinese market. Cloud Village music streaming platform.

NetEase’s subsidiary will offer 16 million shares at a price of HK$190-$220/share. If the right to overallocate is exercised, Cloud Village will be issued an additional 2.4 million shares.

The final share price has not yet been determined. But with the above expected price, Cloud Village will raise about 4.04 billion Hong Kong dollars (equivalent to 519.6 million USD), excluding fees and other costs related to the IPO.

Cloud Village’s revenue in the third quarter of 2021 increased 51.5% year-on-year to 5.1 billion yuan (US$799.6 million), but the unit is still grappling with losses due to a lack of revenue. compete for market share with Tencent. Cloud Village’s revenue mainly comes from user registration, advertising and virtual goods traded on this platform.

For months now, China has tightened regulations targeting its digital technology giants, including issuing a series of legislation covering issues ranging from anti-trust rights to data security. These moves have raised concerns among investors and the capitalization of China’s large technology groups has “evaporated” billions of dollars.

In addition to technology, Chinese stock investors are also worried about the risk of default of Evergrande Group – the second largest real estate group in China (in terms of sales).

However, the director of the GFM Asset Management Fund still thinks that China’s tech giants can still benefit from any new Beijing regulations.

For example, the commonwealth policy of Chinese President Xi Jinping, Tariq Dennison said: “New regulations can attract more technology companies and give them greater incentives, such as: Tencent for example is very capable of adapting to any new regulations and finding new ways to make money. They have a lot of users to serve in a commonwealth model.”

China’s commonwealth policy will basically try to narrow the gap between the rich and the poor and develop a strong middle-class consumer. And these are all customers who will use services of Baidu, JD, and Alibaba.