These tech stocks can be a good option for investors worried about China’s Covid lockdowns affecting supply chains. According to Goldman Sachs, analysts on May 3 stated in a note that the slump in share prices in this sector is likely due in part to China’s Covid lockdown. In addition to the disruptions in supply chains caused by Beijing’s zero-Covid policy and months of regulation from China have continued to impact investor sentiment about the stock market. At Wednesday’s closing, Hong Kong’s Hang Seng Tech index had dropped more than 29%. On the mainland, the Star 50 index — a collection of the 50 largest stocks on the tech-heavy Star Market — has tumbled more than 28% in the same period. Globally, the tech sector has been under threat due to the expected tightening of monetary policy by central banks in an effort to fight inflation. The tech-heavy Nasdaq composite fell more than 4 percent on Monday. Stocks in tech and other growth industries are more vulnerable to higher interest rates, which makes their future earnings less attractive. Goldman analysts still see a few Chinese stocks with better earnings visibility in the first half 2023. Goldman recommends SMIC, a Chinese chipmaker, at a price target of 27 Hong Kong Dollars per share. The stock was trading at a premium of more than 70% from its closing price on Wednesday in Hong Kong. Hua Hong Semiconductor is another Hong Kong-listed Chinese semiconductor company that the bank enjoys. According to Goldman analysts, “Despite near-term headwinds,” we are still positive about China Semis because of its long-term potential growth due technology migration, product lines expansion and rising local demand. Goldman identified Chinasoft as a software stock, and component manufacturer AAC Technologies was also included in the list of companies that are exposed to the mobile phone sector. According to Goldman’s analysts, “We anticipate continued COVID constraints in China and global macro uncertainty, soft market demand and threat of supply chain disruption and companies that are subject to smartphones or other electronics facing more severe headwinds.” “Against this backdrop, we continue to prefer names with growing / diversified end-markets or strong idiosyncratic drivers such as product mix upgrade, share gain, and new products/penetration,” they said.
The 2021 World Artificial Intelligence Conference, Shanghai World Expo Center (July 8, 2021) in Shanghai, China featured an Ubtech Walker X Robot that plays Chinese chess.
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According to Goldman Sachs, these stocks are a great option for those who worry about China’s Covid lockdowns and the impact on their supply chains.
