The Big Tech backlash has come to China, says Jacky Wong in The Wall Street Journal. Regulators recently suspended Ant Group’s $37bn stockmarket flotation at short notice. Now they have proposed new anti-monopoly guidelines that could hit Alibaba and Tencent, the internet giants whose social-media apps and payment and e-commerce platforms dominate daily life in China.
The news rocked Chinese tech shares, says Megha Bahree on Al Jazeera. Hong Kong’s Hang Seng Technology index retreated by 11% over two days last week. China has previously taken a largely “hands-off” approach towards its domestic tech titans, but Covid-19 has made the issue of market concentration unavoidable. E-commerce accounted for roughly one-quarter of sales in China last year, but that figure is “edging towards 30%” due to the pandemic.
The draft rules would ban such practices as “selling goods below cost… and exclusive sales agreements”, says Nikki Sun in Nikkei Asia. Regulators are also concerned about the rise of online loans, which are not subject to normal bank regulations. The move “strikes at the heart” of a business model that depends upon walled technology ecosystems and “scale economies”, says a Gavekal Dragonomics note.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The new safe haven?
US Big Tech has so far received less regulatory pushback, says David Goldman in the Asia Times. The share of the five biggest tech players on the S&P 500 by market capitalisation has doubled over the past decade to 22%. Microsoft, Google and Apple collectively have one-fifth of all the cash held by companies on the index. Some 70% of “all digital advertising revenue…goes to Facebook and Google”. Indeed, so dependable are these revenue streams that the tech giants now “trade the way utilities used to”, closely tracking movements in bond yields.
The prospect of more regulation has been a “dark cloud lingering over the tech sector”, Daniel Ives of Wedbush told Teresa Rivas in Barron’s. Yet the US election results may deliver a “goldilocks scenario” for tech, with a gridlocked Congress unable to agree on antitrust measures. Biden is also likely to stabilise relations with China, helping firms such as Apple whose supply chains are “caught in the crossfire”.
In recent years successful investment performance has boiled down to buying and holding “popular technology names” and watching them soar, says Michael Mackenzie in the Financial Times. Yet it is value stocks that have been shining of late. Nevertheless, investors will continue to put a premium on the tech sector’s superior growth prospects and strong cash flow, which give it defensive characteristics, says Jim Paulsen of Leuthold Group. “Tech will underperform, it will not crater.”
-
Should you invest in Trainline?Ticket seller Trainline offers a useful service – and good prospects for investors
-
Investing in a dangerous world: key takeaways from the MoneyWeek SummitIf you couldn’t get a ticket to MoneyWeek’s summit, here’s an overview of what you missed
-
DCC: a top-notch company going cheapDCC has a stellar long-term record and promising prospects. It has been unfairly marked down
-
How investors can use options to navigate a turbulent worldExplainer Options can be a useful solution for investors to protect and grow their wealth in volatile times.
-
Invest in Hilton Foods: a tasty UK food supplierHilton Foods is a keenly priced opportunity in an unglamorous sector
-
HSBC stocks jump – is its cost-cutting plan already paying off?HSBC's reorganisation has left questions unanswered, but otherwise the banking sector is in robust health
-
Lock in an 11% yield with SabreTips Sabre, a best-in-class company is undervalued due to low profits in the motor insurance industry. Should you invest?
-
James Halstead is a family firm going cheap but should you buy?James Halstead will rebound from a weak patch, while tax changes would be a buying opportunity
