With such unprecedented divergence some analyst are saying the Chinese internet sector is undervalue but is it time for investors to start ploughing into the market? President Xi Jinping’s
new slogan of “Common Prosperity For All” is throwing into question what new regulation will China add to achieve equal wealth distribution and Xi’s calls for higher taxation
has raised concerned making money could be politically sensitive. Internet companies, which have been designated as so-called “key software enterprises” (a category including Alibaba
and Tencent), have enjoyed beneficial corporate tax rates of 10% since 2008. Other companies pay a rate of 25%. There is a strong possibility that China Internet companies honeymoon period of 10% taxation may sooner than later be over. As long as investors fear that the China’s regulators are not finish with new requlations the China internet will need to wait a little longer before bottoming out. September being a traditionally weak month for emerging markets does not support a reversal of fortune in this sector. I believe the seasonal factor points to a Oct – Nov rebound.
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