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Tech Equity Sector Remains Distressed Despite Easing Announcement

  • China equities remain under pressure despite officials recently setting stage for easier measures to stimulate the economic activity and risky assets and potential weaken the Yuan, which has remained strong against most of the major currencies.
  • However, investors do not seem to be convinced by the easing measures announced by some Chinese officials as the strict ‘Zero Covid policy’ could continue to significantly weigh on growth expectations this year.
  • Tech equities (CQQQ) are down 45% since their high reached in February 2021, which corresponds to the peak in China economic activity.
  • The severe government crackdown on a range of industries including tech has also been weighing on the sector in the past year.
  • PBoC will publish December data for aggregate financing this week; investors will carefully watch the dynamics of liquidity (Total Social Financing 12M Sum) in the coming months as a peak up in liquidity could offset some of the selling forces.
  • This chart shows the strong co-movement between the annual change in TSF 12M sum and the YoY change in Chinese tech stocks.

Source: Bloomberg/MNI

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