China A Shares Correlation with World Turns Negative
As of 2021-05-15, Hang Seng Tech Index, which includes many Chinese tech giants, has tumbled about 30% since its February high. Nasdaq 100 Index, on the other hand, fallen less than 3% during the same period.
What is happening? Jackson Wong, asset management director at Amber Hill Capital Ltd says:
…Tech regulations just keep coming in China. The lingering regulatory risk makes forecasting the sector’s growth really really difficult.
Jackson Wong, asset management director at Amber Hill Capital Ltd
Wong expects funds to continue to rotate out of the tech sector into cyclical names and sees mainland market stabilisation as the next catalyst.
If the sentiment recovers in the domestic market, investors could buy more Hong Kong tech stocks and regulatory fears may recede a bit. So far I haven’t seen that happening
Meanwhile, as new Covid-19 outbreak across Asia add uncertainty to the pace of the demand recovery, Tai Hui, Chief Asia Market Strategist at JPMorgan Asset Management, points to the low correlation between Chinese and Global Stocks.
A gauge of 30-day correlation between the CSI 300 Index and the MSCI ACWI Index has turned negative for the first time since October 2019.
Reference:
- Bloomberg, 2021-05-11, “Meituan Shares Drop for 10th Session on Consumer Group Criticism”
- Bloomberg, 2021-05-15, “Worst Asia Stock Slump in Over a Year Shows Few Signs of Abating”
