China Tech Companies To Remain 'Very Much A Growth Play' Even Post-COVID-19, Says Credit Suisse

Credit Suisse Group AG (NYSE: CS) expressed an optimistic view of Chinese tech stocks’ growth potential over the next year. The forecast also factors in the recently imposed stringent anti-monopoly laws by the Chinese regulatory authorities, CNBC reports.

The Swiss bank predicts that China will grow by 2.2% in 2020, followed by 7.1% in 2021.

What Happened: People’s Republic of China is one of the select few countries poised to record a positive GDP in 2020 - an outcome of its efforts to keep the pandemic in check.

CNBC quoted a comment from Credit Suisse’s 2021 outlook, which said that Chinese markets offer “high rates of growth at still attractive valuations.”

While lockdowns have beaten down offline players and brick and mortar stores, tech companies gain more market share. 

Last week, there were reports that Chinese e-tailer Pinduoduo Inc (NASDAQ: PDD) announced it anticipates annual sales growth for groceries in 2020 to be around 2x times year-over-year.

Alibaba Group Holdings Inc’s (NYSE: BABA) cloud division outpaced market leaders Amazon Inc’s (NASDAQ: AMZN) AWS and Microsoft Corporation’s (NASDAQ: MSFT) Azure in revenue growth rate for the September quarter.

Why Does It Matter: According to CNBC, Credit Suisse Chief Investment officer for South Asia, Ray Farris, remarked in Street Signs Asia that the world’s second-largest economy is “one of the few economies that has a credible and rapidly growing tech sector.”

Relying on the recent stock trends after positive results from vaccine trials, Farris added that Chinese “tech is very much a growth play.”

However, the China economy still faces headwinds from many factors, including the fresh wave of COVID-19 infections and a limited possibility of an aggressive stand from President-elect Joe Biden.

Price Movement: On a year-to-date basis, Alibaba Group Holdings Inc (NYSE: BABA) stock is up 27%, Tencent Holdings ADR (OTC: TCEHY) gained roughly 52%, whereas JD.com Inc (NASDAQ: JD) stock rallied 138%. Baidu Inc (NASDAQ: BIDU) is down 2.8% YTD.

Related Link: These Tech Giants Will Take The Brunt Of China's Antimonopoly Rules, As Per Morgan Stanley