Analyzing Chinese Tech Stocks amid Escalating Trade War


Jun. 6 2019, Updated 9:57 a.m. ET

Chinese tech stocks

Technology stocks have come under pressure amid the recent escalation in the US-China trade war. The Invesco QQQ ETF (QQQ) lost almost 13% in May and underperformed other broader market ETFs. Chinese technology stocks have also seen a selling spree. The trade war has started to look like a tech war.

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Alibaba (BABA) saw a negative price action of 19.6% in May. Alibaba’s year-to-date gains have fallen to 10.6%. Last year, while Warren Buffett sounded optimistic about US-China trade relations, Alibaba’s co-founder Jack Ma predicted that the trade war could last for decades.

Baidu (BIDU) lost one-third of its market capitalization in May. The stock has been having a dismal year. Currently, the stock has fallen 31.2% YTD (year-to-date). Although JD.com (JD) lost 11.2% in May, it has risen 25.1% YTD. Chinese markets have underperformed global markets this year. So far, the iShares China Large-Cap ETF (FXI) has risen 2.7% in 2019.

US markets

While Chinese equity markets and stocks fell last month, US markets also saw a selling spree. Looking at FAANG stocks’ returns in May, Apple (AAPL) was the worst performer. Apple saw a negative price action of 12.7%. Alphabet (GOOG), Amazon (AMZN), Netflix (NFLX), and Facebook (FB) lost 7.7%, 7.8%, 7.4%, and 8.2%, respectively, in May.

As the trade war escalates, the Fed has indicated that it could look at lowering the rates. Would a rate cut fully offset the fallout from a full-blown trade war? Read Trump Has the Fed on His Side, but Will It Win the Trade War? to learn more.


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