China Tech Stocks Are Getting More Resilient, Technicals Show
(Bloomberg) -- Some technical indicators are hinting at more resilience for Hong Kong’s battered technology shares, even as the industry faces additional regulatory curbs and concerns about the impact of higher bond yields.
Despite this month’s selloff, the Hang Seng Tech Index’s 14-day relative strength index -- a gauge of momentum -- is making higher lows since hitting a trough in late July. That divergence could be a sign of selling pressure easing on the sector.
In addition, the index of Hong Kong’s tech stocks appears to have broken out of a downtrend against the broader market -- in fact it has narrowly outperformed since late August.
“While techs globally may come under pressure with yields surging, HSTECH is showing resilience given positioning is far far lighter comparatively after eight months of underperformance,” said Sanford C. Bernstein’s Ayush Nagaraj in a note. “The next 10% move is probably higher from here.”
The index, which has dropped 28% this year as Chinese authorities combat everything from anti-monopolistic practices and gaming to online education and data security, suffered another bout of selling on Thursday. Market jitters about the lack of new video-game licenses and impending legislation targeting fair competition sent the gauge tumbling by more than 2%.
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