Tech sector woes take toll on stocks

0 Comment(s)Print E-mail China Daily, November 21, 2018
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China's stock market fell sharply on Tuesday, dragged down by technology shares following a major decline of the tech sector in the US stock market.

Market pessimism persists amid trade tensions between China and the United States, which may impact on the performance of the tech industry, but analysts see the timing as a buying opportunity and expect an uptick in the coming year as confidence may be restored with more supportive measures taking effect.

The Shanghai Composite Index fell 2.13 percent to 2645.85 points on Tuesday, while the Shenzhen Component Index dropped by 2.83 percent after stock markets in the US closed lower, affected by investors' dampened confidence in the technology sector.

The Dow Jones Industrial Average fell 395.78 points to close at 25,017.44 on Monday local time, and the S&P 500 dropped 1.7 percent to 2,690.73.

Some of the most popular tech shares including Facebook and Apple led the losses.

Led by worries over tech companies' earnings and trade tensions, pessimistic market sentiment over tech stocks also clouded China's A-share market. The semiconductor sector dropped by 1.88 percent at the close of trading.

This year has been a tough one for Chinese tech stocks dragged by downward earnings, but "our outlook for global technology stocks broadly is positive, and we believe the door may be open for global investors to diversify their exposure and step into a long-term opportunity in Chinese tech", Richard Turnill, Black-Rock's global chief investment strategist, wrote in a note earlier this month.

A rebound next year can be expected amid strong consumer demand, fiscal stimulus and waning regulatory hurdles, he wrote.

Gao Ting, chief China strategist with UBS Global Asset Management, said further policy relaxation and more supportive measures are expected to help restore market confidence.

A relatively tight credit environment and the impact of Sino-US trade tensions may pose some challenges to economic growth early next year, but the negative impact of the former is expected to be mitigated by increased policy support.

With various support measures in place, some Chinese companies could escape the worst of the liquidity stresses. Infrastructure, construction, manufacturing, capital goods and environmental protection companies should benefit the most, according to S&P Global Ratings.

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