The IPO prices of China’s tech firms have fallen dramatically, with Didi Global trading at 40% below its IPO price. As a result of the recent cybersecurity scandal, shares of Chinese tech companies have been under heavy pressure, as Beijing has vowed to control the development of the country’s tech sector, ensuring the security of personal data and promoting equal development. Analysts say that the influx of negative news is likely to continue, and that the risks associated with Chinese technology stocks will only increase.
While the IPOs of Chinese tech stocks have been historically low, there is reason for concern. On Thursday, the Hang Seng Tech Index, which tracks the 30 largest technology companies in Hong Kong, fell 1.9%, following three days of gains. Although the index has rebounded from record lows, it’s still 25% down year-to-date. But investors shouldn’t despair. There is still plenty of opportunity for investors in Chinese tech stocks.
The future is still uncertain, however. With the government continuing to tighten regulations on the use of data, Chinese tech stocks could face new hurdles. For example, Alibaba could face new limits on location-based services, while Tencent could face limitations on tailored advertising. Such issues are likely to put these companies out of business, which may further depress their shares. As a result, there are still plenty of opportunities to profit from these companies.