Chinese Tech Stocks Come to Life


China may still be in trade talks with President Trump, but that’s not keeping money away from the country’s technology sector.

The PowerShares GoldenDragon Halter Index ($HXC) is up more than 3 percent today and on pace for its highest close since early October. The gains follow two weeks of consolidation above the 50-day moving average, a potential sign that momentum has turned.

Never heard of the index? It’s still likely you know some of its important members like Alibaba (BABA), Baidu (BIDU) and (JD).

There doesn’t seem to be any news to explain their rallies, but a few things seem to be going on. First is the simple return to risk assets after the fourth quarter’s big selloff. As reported recently on Market Insights, safe havens have simply fallen out of favor. Fast-moving Chinese technology stocks are pretty much the opposite of safe havens.

PowerShares GoldenDragon Halter Index ($HXC) with 50-day moving average and Line at Price indicator.

Second, money has shifted to “weak-dollar” assets and emerging markets. Investors began the year focusing on Brazil, but this week’s seeing a shift to Chinese names. Did you know the U.S. dollar is on pace for its lowest close against the yuan since July?

That’s especially impressive when you consider the strength of the U.S. economy. Normally the kind of numbers we saw yesterday should lift the greenback. The fact it’s not happening seems to reflect bullish investor sentiment.

Third, technology stocks are ripping again — especially after semiconductors bounced yesterday.

Finally, 2018 brought a slew of new Chinese technology stocks. Here are some of those IPOs:

  • Huya (HUYA): Videogames
  • Iqiyi (IQ): Streaming video, the “Netflix of China”
  • Pinduoduo (PDD): E-commerce

Some other actively traded names in the Chinese tech space include:

  • Vishops (VIPS): E-commerce
  • Momo (MOMO): Mobile gaming
  • (CTRP): Online travel agency

Disclosure: This post is intended for educational purposes only and should not be interpreted as a trade recommendation.

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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.