Tuesday, July 27, 2021

Chinese Big Tech Companies Got Crushed - It is time to bottom fish?

CSOP HSI Tech Index ETF (3033.HK) traded at a low since listing in August 2020

The CSOP HSI Tech Index ETF (3033.HK) listed in Aug 20 (as shown in Figure 1) and has traded below its year low today.

The ETF is mainly comprised of heavy techs like Alibaba, Tencent, Meituan, Jd.com, SMIC etc, China’s ongoing regulatory agenda against the internet sector in China, be it over monopolistic market positioning or control of data has contributed to the dismal performance China’s Tech sector and the divergence between the US Big Tech share has become extreme.

China’s crackdown US listed China tech companies like Didi and private tutoring has significantly unnerved financial markets with a 6% drop in the CSOP HSI Tech Index ETF and a 4% drop the HSI index today (26 July 2021).  

Figure 1: CSOP Hang Seng Tech Index ETF (3033.HK) Broke Its Year Low Since Listing on August 2020


I’ve received many questions whether this is the right time to bargain hunt on these Chinese big Techs, let me share my thoughts.

 

So why is the CCP suddenly acting against all these big techs?

 

China is waking up to fact that data is the new gold, and it needs to institute rules to accumulate, govern and share it. CCP makes decisions based on what they think is in China’s best long-term strategic interests in achieving its economic growth, reduce the gap between the rich and the poor and the control of China consumer data which is deemed crucial to the China’s national security.  

 

If you are a big tech company in China, you must know who’s the Boss and that the Chinese state’s strategic priorities will take precedence over corporate interests to a greater extent than in the past.  The CCP is likened to be like the emperor and its decision is like the emperor’s edicts, obey and you stay alive, and disobedience will almost be the end. The blunt assertion of the state’s interests over private enterprise in China also raises the risk premium of investing in Chinese assets.

 

In order to reduce inequality and promote sustainable economic growth, China needs to ensure competition is sustainable and it means you cannot win by creating a artificial monopoly and if you win it must bring tangible benefit to the Chinese consumers. Alibaba and Tencent is a good example of company that infringed on these rules. The days of free play for the Chinese techs are over, they are likely to grow their business under a strict regulatory guideline which means their future earnings will be hurt and it will ultimately hurt their valuation, and this is precisely the reasons why Cathie Woods has been selling Chinese techs on fear over a “valuation reset”.

 

Is it time to jump in?

In the short term, there’s going to be volatility as the crackdown is clearly showing no sign of abating and it will take time to play out. I believe this clampdown by CCP is long term positive for China Tech because it will enable them to grow at a sustainable pace although I would agree that it is a short-term negative.

 

Am I still bullish on Chinese Tech stocks?

 

Well, I think the potential of these stocks are enormous. If you are a short-term investor, you need time your entry well, however if you are a long-term investor (3-5years horizon) this could be a great opportunity to start dollar cost averaging on these stocks.

 

Many of you who have been following me know I have been very successful with timing the market with my charts, so what does the chart say?

 

Let me just share the Alibaba and Tencent Trade Plans:

1.    Alibaba Trade Plan: First called a Sell on Alibaba (11 November 2020)

On 11th of November last year, I called a short on Alibaba based on my trade plan. It has since hit all the targets on my trade plan (as shown in Figure 2).  

 

Figure 2: Alibaba (9988.HK) 


2.    Alibaba Trade Plan: (27 July 2021)

Alibaba current trading at 191.76 (at the point of this write up).

According to my trade plan, the key support that offers a good entry level is between 172 – 182 levels while 212 – 230 levels post a huge resistance. Turn long term bullish only when the price breaks above 230.



3.    Tencent Trade Plan: (26 July 2021)

Tencent closed at 490.00 on 26 July 2021.

According to my trade plan, the immediate target could be 472 (first target), and if it breaks down further, we could be looking at targets of 425 (second target) and 405 (third target).



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All posts and charts are for educational and illustration purposes only
Thursday, June 24, 2021

Xinte Energy (1799.HK) - Breakout of short term downtrend, could head for next target at 16.50.

 


A company that provides of solar energy and wind power solutions, last done 14.82.
Breakout of short term downtrend, could head for next target at 16.50. A convincing break above 16.50 could see the stock heading towards its next target at 20.00.
All posts and charts are for educational and illustration purposes only
Monday, June 14, 2021

Bullish Long Term View on Crude Oil (Stay bullish on Oil stocks like Sembawang Marine, Rex International, PetroChina, Kunlun Energy etc)

 


My bullish view on the oil price and oil stocks , which as previously discussed here is likely to act as a catalyst for an escalation of the inflation scare in coming months, is based on both booming demand and, even more importantly, a growing lack of supply.

 

The One reason demand is running well ahead of supply is not only not just coming from a re-opened American economy, but also the fact that American households continue to be beneficiary of the fiscal stimulus cheques that will expire in Sep 2021.

 

Meanwhile, investment in exploration outside OPEC has been declining since 2013 when the shale boom went bust as US move aims to be carbon neutral by 2050.

 

The downturn in investment was further escalate reluctance by financial institutions to be seen funding such projects that is not climate friendly exacerbating the lack of supply. This is likely to lead to a structural decline in upstream investment.

The US Energy Information Administration’s (EIA) latest Monthly Drilling Productivity Report shows that US shale oil production has been declining month on month.

 

As discussed in my earlier post a week ago, crude oil has turned bullish on a longer term view when it broke out of its long term downtrend channel in Apr, it should be heading for its near term target at USD 75 and 83 in the medium term

 

Stay bullish on oil stocks like Sembawang Marine, Rex International, PetroChina, Kunlun Energy etc.


My bullish view on the oil price and oil stocks , which as previously discussed here is likely to act as a catalyst for an escalation of the inflation scare in coming months, is based on both booming demand and, even more importantly, a growing lack of supply. 


The One reason demand is running well ahead of supply is not only not just coming from a re-opened American economy, but also the fact that American households continue to be beneficiary of the fiscal stimulus cheques that will expire in Sep 2021. 


Meanwhile, investment in exploration outside OPEC has been declining since 2013 when the shale boom went bust as US move aims to be carbon neutral by 2050. 


The downturn in investment was further escalate reluctance by financial institutions to be seen funding such projects that is not climate friendly exacerbating the lack of supply. This is likely to lead to a structural decline in upstream investment. 

The US Energy Information Administration’s (EIA) latest Monthly Drilling Productivity Report shows that US shale oil production has been declining month on month. 


As discussed in my earlier post a week ago, crude oil has turned bullish on a longer term view when it broke out of its long term downtrend channel in Apr, it should be heading for its near term target at USD 75 and 83 in the medium term 


Stay bullish on oil stocks like Sembawang Marine, Rex International, PetroChina, Kunlun Energy etc. 


Sembcorp Marine (SGX: S51): last traded at S$0.205.

Rex International (SGX: 5WH): last traded at S$0.19.

PetroChina (0857.HK): last traded at HKD 3.57.

Kunlun Energy (0.135.HK): last traded at HKD 6.94.


 


All posts and charts are for educational and illustration purposes only

GSS Energy - Broke out from its 6 years downtrend today. Could be heading for the following targets 0.091, 0.104 and 0.122.



All posts and charts are for educational and illustration purposes only
Thursday, May 20, 2021

Distribution Price Action Pattern





I predicted BTC crash three days before it happened, based on this chart pattern.


S&P chart pattern looks similar “Three Peaks and A Rebound”

Could it happen again?



All posts and charts are for educational and illustration purposes only
Tuesday, May 18, 2021

Phases of The Market - Bloomberg Commodity Index

 

Bloomberg Commodity Index

This chart adds to my conviction that we have entered a Commodity Supercycle.
All posts and charts are for educational and illustration purposes only
Friday, May 14, 2021

Straits Times Index - Early Sign Of A Technical Breakdown

 


Straits Times Index - Early Sign Of A Technical Breakdown
This week, we are beginning to see a small crack in the STI uptrend after a stellar March-April price surge, it has spent the last four weeks consolidating in a narrow range between 3,134-3,145 and 3,211- 3,221. This week weakness it broke the support at 3150 and it also broke the support provided by the 200 Days MA . This leaves the market vulnerable to further weakness in the coming session, with the breakdown pointing to a downside target of 3,019.
All posts and charts are for educational and illustration purposes only

Ethereum - The correction have Begun!

 


Ethereum - The correction have Begun ! After a stellar 2 months breathtaking run , it’s taking a rest . First target for the short term is 3382 .

All posts and charts are for educational and illustration purposes only

Bitcoin - The Price Action is setting it up for a steep fall

 


Bitcoin - The Price Action is setting it up for a steep fall . Having consolidated between 4500 to 60,000 since feb 2021 , the price action is suggesting we are in a distribution phase where the big boys could have or are on the process of exiting . The 47224 level is a crucial one , if it breaks we could see prices heading for 39115 which coincides with the 200 days MA.

All posts and charts are for educational and illustration purposes only
Wednesday, April 28, 2021

US 10 Year Treasury - Breaking Out

US 10 year treasury breaking out after a 1 month consolidation. Stock market could correct if it challenges the last high at 1.71.



All posts and charts are for educational and illustration purposes only