Legal risks are difficult to stop Chinese technology companies from accelerating by 2021

The Chinese bond and stock market is forecast to offer greater investment opportunities by 2021, according to Credit Suisse.

Alibaba, along with Tencent, Baidu, and Meituan, are rated as the “four great” technology of China. Photo: Shutterstock

In its 2021 outlook report, Credit Suisse Financial Services Group (Switzerland) stated that the Chinese market (bonds and stocks) will achieve “high growth rates with valuations still. interesting”.

The world’s second-largest economy is predicted to be one of the few countries to achieve positive growth in 2020 when the Covid-19 pandemic in this country is relatively controlled. Credit Suisse forecasts China to achieve 2.2% growth in 2020, then leaps up to 7.1% by 2021.

Technology is one of the key levers for China’s development. Technology is one of the main growth areas in the Chinese market, said Ray Farris, Head of Investment, South Asia at Credit Suisse. China is “one of the few economies whose technology sector is growing at an amazingly fast rate”.

Yet, the Chinese tech market is witnessing fierce competition, where long-standing tech giants attack new competitors trying to steal most of their market share.

“Unlike the US, where technology has recently been seen as something of a substitute for value transactions, if we look at the capabilities of Chinese technology through the published vaccine positive information, yes It can be seen that the Chinese technology industry is really benefiting because in China, technology is a very important growth pole, “added expert Credit Suisse.

The investment value in relation to the Chinese tech firms’ stock acquisition strategy seems to be below their book value. Essentially, Chinese technology stocks are considered undervalued by the market.

Farris explained that Chinese technology companies are “stealing market share” from traditional investors in retail, healthcare, education and other similar industries and the trend. will continue in the future. “So, China’s stronger growth will stimulate stronger growth in its technology sector,” Mr. Farris stressed.

According to a report by Credit Suisse, the interest rates of investors according to the MSCI China Index are expected to increase from 2% in 2020 to 21% in 2021.

However, Mr. Farris noted a number of risks that China faces, first of all, the increasing number of Covid-19 infections. “Another risk is that US policy towards China may become more aggressive and disruptive than it used to be. But we think that is unlikely to happen with the administration of President Joe Biden,” Mr. Farris added and explained that President-elect Joe Biden’s approach would be more predictable and disciplined.

According to Mr. Farris, legal pressure is also a significant risk, but not likely to derail growth in the Chinese technology industry.

Earlier this month, Chinese regulators drafted a new set of antitrust laws that could target major internet companies in the country. The immediate corollary was that technology stocks were taken down after draft laws were released.

“If you look at the recent legal moves, they seem quite plausible. Those legal regulations don’t seem to be the thing that can really change the long-standing trend of big Chinese tech companies. – a trend that grows by gaining market share in the traditional way “, Mr. Farris emphasized, while affirming the outlook for China’s technology industry is still optimistic.