Tech Giants' Stocks Plunge, Hang Seng Tech Index Down 68%: Is There Still Hope?

Although Chinese concept stocks have rebounded in the past two days, and the Hang Seng Technology Index has also rebounded significantly, compared to the high point during last year's Spring Festival, it is still at a very low level.

The Hang Seng Technology Index reached a high of 11,001 points around the Spring Festival in 2021, and when it hit the low point in the previous period, it had created a 68% retracement.

American technology stocks have repeatedly set new highs, with market values reaching trillions, but these Chinese technology stocks have performed so poorly. Are they no longer viable?

Do Chinese concept technology stocks and related funds still have a chance to return to their highs?

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Recently, JD.com released its 2021 performance, with a net income of 951.6 billion yuan for the year, a year-on-year increase of 27.6%, and the growth rate is still very impressive. However, the financial report shows that the company had a net loss of 5.2 billion yuan in the fourth quarter of 2021, far worse than market expectations, with a net profit of 24.325 billion yuan in the same period last year.

Similarly, Alibaba's financial report was also rated as the worst in the past ten years, and it is currently experiencing the largest negative growth in its core e-commerce business since its establishment 18 years ago, and it seems that the inflection point is approaching.

Now, the domestic market is unstable, and the three giants have successively experienced slow user growth or even a decrease in 2021, but this was also expected, as customer growth will eventually reach its limit.

This is related to the development of the Internet and also to the current economic difficulties. China's economy is facing three pressures: demand contraction, supply shock, and weakening expectations. Since the pandemic, income expectations have decreased, leading to a significant reduction in consumption levels.Looking at the published online retail data, the total retail sales are still on the rise, but the growth rate is continuously declining. In January-February of 2021, the growth rate was 32.5%, but by November, the cumulative growth rate for January-November was only 15.4%. The stock prices of internet companies are mainly supported by expected growth. If expectations are poor, stock prices fall, which seems quite normal.

On the other hand, several emerging e-commerce industries have emerged, and their rapid growth also threatens the e-commerce status of the original giants. China's largest short video platform has daily active users exceeding 800 million, and even one of the original BAT giants had to choose to cooperate with it. As these short video platforms increasingly build their own e-commerce platforms, operations are growing and reaching targets, which also means threatening the status of the original e-commerce giants. If turnover is impacted, it also means facing significant risks. As the times change, more e-commerce systems emerge, and every field is growing. This e-commerce battle is estimated to be difficult to determine a winner for the time being, but some platforms will definitely be eliminated one after another. Unless a new model is found, everyone can only fight desperately in the red ocean.

In addition, over the years, various tech giants have continuously increased their market value by investing externally, holding shares, or controlling shares. But now this method also faces a test.For instance, one of the BAT companies has invested in over 500 enterprises in the past, and the latest financial report indicates that the total value of investments in the third quarter of last year alone was written down by more than 20 billion. Moreover, influenced by a multitude of factors, there is a possibility that significant write-downs may continue to occur in the future.

Under the tide of antitrust enforcement, these large companies have faced penalties for violations in many areas over the past year, causing Chinese internet company stocks to plummet. To cope with this, they have had to terminate or sell off some of their businesses.

Originally, they continuously bought and added to their portfolio to support stock prices, but now they are constantly terminating or selling, subtracting from their operations, which naturally has a significant impact on stock prices.

However, even though the prosperity of these internet companies is not what it used to be, it does not mean that new companies can break through the barriers. With massive amounts of data and traffic, what they need is a new profit model. The current predicament might be the perfect opportunity to incubate new models, after all, in the previous favorable conditions, everyone was more inclined to maintain the status quo.