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Tech, China and the future

After the past couple of weeks of weakness in the tech sector, many stocks have reached their price support levels. In conjunction with the tech correction, we see major opportunities in china market due to stricter government intervention. Stocks such as TIGR and NIO has dropped to levels that are extremely tempting. The question remains: Is it a good time to get a great bargain on these stocks?

There are 2 factors for us to be mindful of as we ponder on this question.

Firstly, the effect of China's policies. As China's regulations increases, many investors are fearful that China companies will be restricted in terms of revenue due to tight government controls. However, just as the risk of tighter implementation of regulation affecting profit is high, there can be massive upsides taking hold of the opportunity when there is high levels of fear in the market. In my opinion, China and US trade tensions will always exist, each trying to outdo the other. However, both countries know that at the end of the day, collaboration will lead to greater prosperity of both countries. To recover from the impact of COVID-19, it is essential for both countries to remain in an amicable state.

Secondly, time horizon. The volatility in these stocks will remain high in the short term. The uncertainty in the COVID-19 situation all around the world would continue to bare its fangs at the market. Despite the major indexes being at ATH, it is still unclear if there is a major correction incoming. However, in the long term, it is easier to pinpoint the direction of the markets. Hence, this consideration should be applied to both the Chinese companies and tech companies as well.

In my opinion, having a small part of your portfolio in good and fundamentally-sound chinese and tech companies is crucial. While having sufficient cash and resources in a relatively stable source can allow for better rest at night.