Taps Coogan – February 22nd, 2022

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Hong Kong’s Hang Seng Tech Index, a benchmark for Chinese tech stocks, has hit a record low today amid renewed fears of tech crackdowns by Xi Jinping, as the following chart from Bloomberg highlights.

As Bloomberg notes:

“Members of the Hang Seng Tech Index have lost a combined $1.6 trillion since the February peak last year, Bloomberg data show.

The impact on tech earnings will be on show again on Thursday, when Alibaba is due to report an estimated 60% drop in quarterly profit.”

While anything down this badly is probably due a bounce, the China bull thesis is unraveling before our eyes.

The latest target of Xi Jinping and the CCP’s ever expanding crackdowns appears to be food delivery businesses like Meituan. The CCP has ordered them to cut delivery fees because… why not. That comes on the heals of prior crackdowns on cinema, celebrities, gaming, Alibaba, fin-tech, tutoring, companies listed oversees, etc… All the while, China’s epic real-estate development bubble – so critical to fabricating its GDP numbers – continues to unwind, and China faces unprecedented demographic headwinds.

Of course, the institutional momentum on Wall Street to remain bullish on China is still holding fast with most investment banks bullish again this year, just like they were 75% up from here. The denialism about what Xi Jinping represents is bewildering.

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