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Analysis of China technology stocks
26 Oct 2021 (627 views)  

Many technology stocks in China have dropped by about 50% during the past few months, after China took action to control the monopolistic practices and power of these company.

I have been asked this question - with the drop in price, is it attractive to invest in these stocks now?

I present the financial indicators in the table below.

a) It covers 7 China tech stocks. The stock price dropped between 23% to 53% during the past year.

b) Baidu has a PE ratio of 8.79 times. Three other stocks, namely Alibaba, Tencent and JD have a PE ratio between 20 to 23. These PE ratios are less than half of the comparable ratio for the American stocks, namely Amazon and Alphabet.

c) These four stocks have a total debt to equity ratio of less than 40%.They are not highly geared. 

I consider that it is quite safe to invest in the 4 stocks with a PE ratio of less than 23 times. They offer better value than the American stocks with a much higher PE ratio.

I do not have any opinion about the other three stocks that are not profitable, i.e. Didi, Pinduoduo and Meituan.

However, I would personally prefer to invest in other good quality China stocks with a PE ratio of less than 10 times in the traditional (i.e. non technology) sectors. 

Note - this is my personal view. I am not giving financial advice.

Tan Kin Lian

 


Analysis of China technology stocks
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Many technology stocks in China have dropped by about 50% during the past few months, after China took action to control the monopolistic practices and power of these company.

I have been asked this question - with the drop in price, is it attractive to invest in these stocks now?

I present the financial indicators in the table below.

a) It covers 7 China tech stocks. The stock price dropped between 23% to 53% during the past year.

b) Baidu has a PE ratio of 8.79 times. Three other stocks, namely Alibaba, Tencent and JD have a PE ratio between 20 to 23. These PE ratios are less than half of the comparable ratio for the American stocks, namely Amazon and Alphabet.

c) These four stocks have a total debt to equity ratio of less than 40%.They are not highly geared. 

I consider that it is quite safe to invest in the 4 stocks with a PE ratio of less than 23 times. They offer better value than the American stocks with a much higher PE ratio.

I do not have any opinion about the other three stocks that are not profitable, i.e. Didi, Pinduoduo and Meituan.

However, I would personally prefer to invest in other good quality China stocks with a PE ratio of less than 10 times in the traditional (i.e. non technology) sectors. 

Note - this is my personal view. I am not giving financial advice.

Tan Kin Lian