Chinese tech stocks have been on fire and outpacing returns from high profile U.S. tech plays.
CNBC has a story looking at the strong performance of Chinese tech stocks like Alibaba (BABA), JD.com (JD) and MoMo (MOMO) compared to FANG stocks – Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google – now Alphabet – (GOOGL). The MSCI China Information technology Index is up 56% this year compared to a 23% gain in the S&P 500 Tech Index. One of the drivers of the healthy advance in China tech stocks is the growth of online shopping in the Middle Kingdom:
Online shopping is a much bigger business in China than the U.S., and growing faster.
Chinese online sales of physical goods leaped 28.6 percent in the first half of the year, to 2.37 trillion yuan ($350 billion), increasing their share of China’s total retail sales to 13.8 percent from 11.6 percent in the first half of 2016, according to official Chinese reports.
In contrast, U.S. e-commerce sales grew 14.7 percent, to $105.7 billion in the first quarter, accounting for 8.5 percent of total retail sales, according to the latest data from the U.S. Department of Commerce.
Given the growth opportunity, Chinese tech giants such as Alibaba and Baidu are “becoming more internationally recognized,” said Peter Donisanu, global research analyst at the Wells Fargo Investment Institute.
The Hong Kong dollar has been struggling, with the currency falling to an 18-month low against the U.S. dollar to which it is pegged in a tight range. The South China Morning Post has taken a look at what is troubling the HKD:
The Hong Kong dollar has been the worst performer among Asia’s 11-most traded currencies in the past month, according to Bloomberg data.
Under the linked exchange rate system, the Hong Kong Monetary Authority (HKMA) is obliged to prevent the currency from breaching either side of a trading band between 7.75 and 7.85. In the current situation, it would sell US dollars and buy Hong Kong dollars to reduce interbank liquidity and raise Hong Kong dollar rates in order to curb depreciation pressure.
Historically however, the HKMA doesn’t wait for the currency to reach the 7.85 lower limit of the trading band before defending the peg, and may prefer intervening in currency markets pre-emptively to avoid panic among financial investors.
Tensions are rising in North Asia thanks to North Korea’s penchant for firing missiles close to its neighbors, and Japan’s new defense review has zeroed in on that threat. Reuters has the details on the review, which was released on Tuesday:
Japan’s annual Defence White Paper was released after North Korea fired two intercontinental ballistic missiles (ICBMs) last month that were launched on lofted trajectories and landed off Japan’s west coast.
“Since last year, when it forcibly implemented two nuclear tests and more than 20 ballistic missile launches, the security threats have entered a new stage,” the Japanese Defence Ministry said in the 563-page document.
“It is conceivable that North Korea’s nuclear weapons program has already considerably advanced and it is possible that North Korea has already achieved the miniaturization of nuclear weapons and has acquired nuclear warheads,” it said.