Back
Details Cookies
United Kingdom
Important margin product information

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX or any of our other products work and whether you can afford to take the high risk of losing your money.

Cookie policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

China’s consumer and technology sector in strong momentum China’s consumer and technology sector in strong momentum China’s consumer and technology sector in strong momentum

China’s consumer and technology sector in strong momentum

Equities 6 minutes to read
Peter Garnry

Head of Equity Strategy

Summary:  In today's equity note we highlight our China consumer & technology basket which is now the second best performing theme basket over the past year. Risk sentiment has naturally shifted higher as the Chinese government lifted its Covid restrictions and today the entire sector got another boost as Alibaba revealed a new plan to split into six separate businesses to unlock value. While we remain long-term cautious on Chinese equity returns there is no doubt Chinese consumer and technology stocks look increasingly like a tactical bullish play.


Alibaba jumps on new divestment strategy

China’s largest e-commerce company Alibaba announced today that it will create a new organizational and governance structure splitting the conglomerate into six separate businesses. The overall architecture will be explained by management on a conference call tomorrow. In the brief press statement Alibaba says that the move is done to unlock value and this of course the standard breakup phrase when conglomerates split up, but the move also aligns Alibaba with the government’s anti-competition laws. Since 2021, Alibaba has been at the centre of Chinese technology regulation and selling off assets have on the table ever since. The Chinese government want to prevent Chinese technology companies from exercising cross-subsidisation between business units and locking in consumers in their eco-systems. The natural evolution is that Tencent and Baidu might pursue similar moves in the future.

Alibaba will split the business into six units: Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics Group, Global Digital Commerce Group and Digital Media and Entertainment Group. The divestment will undoubtedly simplify the business lines and unlock value, in addition to lower the regulatory threats. The publicly listed company will be the China e-commerce business which is 68% of total group revenue with the remaining units becoming privately owned in the beginning but Alibaba will explore the opportunity to list these units. Alibaba shares rose 13% in Hong Kong trading on the news and the main question is whether this is another catalyst that will make Chinese technology stocks a winning trade this year.

Alibaba share price | Source: Saxo

Are Chinese consumer and technology stocks a must trade in 2023?

Chinese investment assets saw an increased risk premium in the aftermath of the Russian invasion of Ukraine and this risk premium has largely remained in Chinese equities. More government involvement in the economy, technology regulation, a real estate development crisis, and the low growth due to the lockdown did not help either. Our position has been that Chinese equities will not be a long-term winner for investors and this remains our view, but the Chinese reopening is creating short-term opportunities.

Our China consumer & technology basket is up 7.2% over the past year making it the second-best performing theme basket in our universe of 24 theme baskets. Only the defence basket has done better up 14.8%. Luxury stocks which we recently wrote about has been one way foreign investors have expressed a positive view on the Chinese reopening. For those investors that are willing to take additional risks, Chinese consumer & technology stocks listed on Chinese exchanges are an option. The relative and absolute momentum suggests that Chinese consumer and technology stocks could become the winning trade this year. It will likely require that the global economy avoid a recession and that the Chinese government continues to support the private sector.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.