Volatility transferred from China to US Tech stocks?

Nov 23, 2017, 12:50 PM

Announcements from China tend to be overlooked, says Ben Kumar, Investment Manager 7IM. The government is saying to equities markets and speculative traders in China, "we are worried about the credit expansion and the run-up in asset prices". Chinese markets have fallen 3% as a result and they have done it at a time where other markets (US & Japan) are closed for holidays.

The main catalyst for shocks in the market has been China and Chinese government policy. It becomes difficult to predict whats going on says Ben.  However, you can react to it. Big 3% market moves will panic traders, depending on how it has moved since they have left. 

Investors seem to have been waiting for a pullback, according to Ben. This news from China may be what causes them to get out of the market at the moment. 

For Ben Kumar, the main concern is volatility being transferred from China to US Tech companies that have kept this rally going. If China goes down, and China tech goes down it will have a knock on effect - and tech may consequently need to be re-rated slightly.  This transition mechanism might be dangerous.

Lots people are incredibly long on US tech stocks, and if say, Apple was to drop 5% it consequently would take out a lot of the index. This could hurt investors. If something is wrong in China internet space, it probably is in the US too. Listen the full segment to hear Ben's full analysis of the China/US Tech stock situation. 

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