The big Chinese digital winners have been playing an increasingly important role in the Chinese stock market. The Chinese IT sector, especially internet, forms the bulk of ‘new China’, and is the key beneficiary of the digital transformation in the country. These companies innovate themselves in areas including commerce, payment, media and entertainment to take market share from the traditional economy. 

 

Government policies on the sector have been favourable. In particular, recent initiatives on digital infrastructure will likely accelerate the development of these companies. During the Covid-19 outbreak, the sector has shown its defensiveness during a synchronised global economic slowdown. We believe this secular growth profile justifies a scarcity premium in valuations. 

 

Moreover, the US-China tech divide could pose an opportunity for these local tech giants to have a fortress market share.

 

To gain exposure to this trend with a single trade, investors could consider our Tracker Certificate on the Hang Seng Tech Index Top-20.