LIVE MARKETS-China tech rebound not quite enough to chase the bears away

ReutersFeb 21, 2025 4:28 PM

Major U.S. stock indexes red; Dow transports down 2.8%
Industrials weakest S&P 500 sector; staples up the most
Euro STOXX 600 index up ~0.5%
Dollar, bitcoin up; gold off; crude down ~2%
US 10-Year Treasury yield falls to ~4.46%

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CHINA TECH REBOUND NOT QUITE ENOUGH TO CHASE THE BEARS AWAY

The sharp rebound in Chinese technology stocks is exciting some, but is it enough to bring back investors spooked by U.S. tariff threats and China's economic woes?

The Hang Seng Tech Index .HSTECH has jumped 6% this week, and leapt over 31% year-to-date - far outperforming the 2.2% YTD rise in the U.S. technology sector .SPLRCT - with the potential of DeepSeek's AI technology and signs of support from Beijing reigniting interest in Chinese tech.

However, it remains to be seen whether those banner gains will be enough to help Chinese equities long term, and offset concerns about the impact of U.S. tariffs - MSCI's index of Chinese stocks .dMICN00000PUS actually slipped 0.5% this week, though it's up over 12% this year.

"We believe China's internet sector will outperform the broader MSCI China index this year amid AI optimism, improving fundamentals, encouraging shareholder returns, and ongoing macro-economic policy support," analysts at UBS wrote in a note.

However, they remain neutral on Chinese stocks overall given potential volatility from U.S. tariffs. Similarly, Adam Turnquist, chief technical strategist at LPL Research, says that while the breakout in China tech has presented some trading opportunities, he still prefers U.S. stocks to international equities.

"This rally looks real from a technical lens, and valuations look cheap...but in terms of China, the bear case is well known."

(Lisa Mattackal)

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