A fair amount of Indian investors are also getting their fingers burnt.
Edelweiss’ Greater China Equity Off-shore Fund, the only China-dedicated fund in India, has seen a substantial fall in its net asset value over the past six months due to the losses suffered by China’s technology companies.
The fund was substantially outperforming the BSE500 Total Return Index through most of the past year as the Chinese economy recovered much earlier than the world, as the country was successful in containing the spread of the Covid-19 after suffering in the first quarter of 2020.
Since March, though, the fund has slumped more than 6 per cent against the 13 per cent gains for the BSE500 index, reflecting the impact of the ongoing regulatory pressure that China’s technology companies are facing from the Chinese government.
The Greater China Equity Off-shore Fund invests in JP Morgan’s Greater China Fund, which is dedicated to investing in 50 best stocks in the Chinese equity market and Chinese stocks listed in the US stock market.
China’s actions against its technology companies and startups have shocked the global investment community with the reverberations of the action spreading from global equities to currency markets. Investors have lost close to $800 billion in equity value over the past six months, as China tightened control over the technology space.
However, it is last week’s move on the country’s education technology sector that spooked investors most. The Chinese government outlawed for-profit school tutoring companies in a major blow to the country’s substantially large edtech sector and it led to billions of dollars in market value being evaporated.
Investors are now worried that the Chinese government won’t stop here and may bring in more regulations to create a vice-like grip on other technology sectors. Goldman Sachs trading desk on Monday reportedly said investors should prepare for more such actions in other sectors as Xi Jinping looks to reign in the billionaires created by the prosperity of the tech sector.
Famous Chinese commentator and Harvard University educated Ren Yi provided the defining insight on what’s happening in China: “…go to those industries that fit the central government’s general policy and are in line with new patterns of future development.”
China’s tech reckoning is against its consumer internet companies, not all technology companies, and that means most Chinese investors will bleed as long as Xi Jinping wants them to. That would include thousands of Indian investors, too.
