China Tech and Semiconductor Market Outlook

China's tech market is undervalued, presenting significant upside potential despite long-term uncertainties.

### Optimism in China's Tech Sector: Short, Medium, and Long-Term Perspectives
* 📉 Many investors have been skeptical about China, but the market appears **undervalued compared to the US and other developed markets**, suggesting a **potential shift in sentiment**.
* 📈 The Chinese tech market is characterized by **momentum and quality**, and there is a belief that it has **further upside potential** despite modest upgrades in outlook.
* 🔍 The semiconductor sector in mainland China is seen as **state-supported and strategically important**, making it a favorable area for investors, although caution is advised for the long term due to **potential restrictions from developed economies**.
* ⚠ Historical patterns of sharp bear markets following bull cycles in China raise concerns about the possibility of **investors getting burned**, necessitating **close monitoring of market conditions**.
* 💰 Institutional and retail money is flowing into the semiconductor sector, with **optimism remaining strong** as interest rates are cut and the economy expands, which may **attract more participation**.
* 🌐 Trade and supply chain risks are considered significant, but **strong demand for technology products** provides some reassurance for investors in both China equities and the global semiconductor market.
* 📊 The **4% yield on the ten-year note** is a macroeconomic factor to consider, but the overall strength of the economy and job market remains **positive for corporate earnings and the semiconductor sector**.

When you're weighing up the factors in the context of China Tech, what were the things that you were looking at short, medium, and long term? And thanks for having me. I think we have been skeptical on China, as many people are, but I think is really how undervalued China has been versus, say, the US or other developed markets and also the fact US position has been very light. I mean, for us, we have been underweight for quite a sustained period of time. So I think that that is shifting and I think the Chinese market is a very momentum-driven, very quality-driven. So we have seen both happening and I think we would like to participate in this rally. This probably has more to go. And in terms of Chinese tech, I mean, obviously undervalued, very unloved versus the US counterpart. Obviously, there are different, but still we think that there is still much

upside potential from here. But having said that, we, I mean, we just upgraded modestly. I think there's still a lot of question marks for the longer term. Emily's reporting just in that conversation was largely about some of the domestic chip names in China. What's your attitude towards the semiconductor sector in mainland China? Yes, I think it is obviously a very state-supported sector. It has been for a while long term. Why? So I think it makes sense for investors to favor the sector, given basically I think the new tech, the semiconductor strategic areas of, you know, those equities have, you know, should do well given how important that is. But ultimately, we have to understand that a lot of developed economies are likely to still be skeptical and, you know, have restrictions of all sorts on those companies' products. So I would say I would participate in the rally. I do think that it has further to go, but I would be a bit more cautious over

longer term. And we have to kind of understand where to take profits when it is necessary to that point. Janet, do you think that people are protecting to the downside enough? Do we think a lot of people are going to get burned once again? I mean, it is potentially possible. We have seen that play out before in the previous bull market cycle and then a very sharp bear market in China. We have seen that play out again and again. But I think it could last for quite a bit, as I said, given how large the positioning, how underweight it is for global investors. So I would say it could have further to run in the next, you know, a couple of months at least. I think the Chinese authorities, their heads are tied. They would just have to provide more stimulus. But you're right, there is absolutely a chance for some investors to get burned. And so that's why we have to monitor it.

very closely. What's been interesting is there's been institutional money flowing in. David Tepper saying how much he's liking China and also retail. I want to get your check just more broadly on sentiment towards semiconductors globally, technology globally. Where are we seeing the optimism still in institutional money or is it now sort of retail? And we question that for the longevity. Um, I think both. I think for us, for example, we still like the global semiconductor sector. Obviously, that's mostly us play. So I think there's a lot of structural supportive drivers behind that. We are very happy to get exposure to those high-quality companies. I think for institutions, I think it will be very dangerous if you don't participate in the semiconductor that I relate of theme. I think for retail investors is I think once the momentum is back, I think that will draw in more participation, particularly as interest

rates are being cut. The economy continues to expand, and hopefully less bad news out there on the headlines. I think that could help. Overall, we still like the sector pretty much. We have stayed invested, and we continue to encourage investors to add in more money when valuations have turned attractive. So, in the past couple of months, Janet, when you got to your desk this morning in London, how big a factor or risk was trade risk or supply chain risk for technology investors around the world? Obviously, it is part of the consideration given that, you know, the industry is very, you know, the supply chain is very complicated. And if there's, well, widespread trade protectionism, then obviously that's not great. But fundamentally, the demand is still very strong. And I think what we are a bit more reassured now is that if you look at the polls on the, you know, the probability of winning the election by betting

market has gone down. Obviously, it is a very tight race, but it gives us a bit of comfort to be a bit more positive on the China equities story and also the global semiconductor play. But I think ultimately, fundamentally, it is about the demand, the long-term build-up of air infrastructure, and how, you know, strategically important that sector is thoughtful, many sovereigns out there. Janet, how important therefore when you sat down was the 4% number on the ten-year yield in that macro context for these events? Well, the thing is, yeah, we saw youth go back to 4%. I think some small, small to be cast-offs could be struggling a little bit today. But we still see some of the key semiconductor stocks are rising. Obviously, it is very specific. But what we think is, you know, I think, yeah, a strong economy, good job market ultimately is good for the world.

economy, for the US, for corporate earnings, etc. I wouldn't look too much into this one-day move for equities. If they're down or struggling a little bit, I would still be quite comfortable to be overweight in the US, certainly in the U.S. semiconductor space.

Chinese Chip Stocks Are in Rally Mode

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Bloomberg Technology

Investing in China Tech: Short, Medium, and Long Term Perspectives

The speaker has been skeptical about China but notes its undervaluation compared to the US and other developed markets.

They see a shift in the Chinese market's momentum and quality, indicating potential for further growth.

The semiconductor sector in China is state-supported and strategically important, but the speaker remains cautious due to potential restrictions from developed economies.

Market Sentiment and Investment Strategies

There is a concern that many investors may not be adequately protecting themselves from potential losses, leading to the possibility of getting burned, especially in the context of China's market cycles.

The current positioning of global investors is underweight, suggesting that there may be further market growth in the coming months, driven by stimulus from Chinese authorities.

Both institutional and retail money is flowing into the market, with a positive outlook on the global semiconductor sector, indicating a potential for increased participation as momentum builds.

Positive Outlook for the Technology Sector

Rates are being cut, and the expanding economy is bringing less negative news, leading to a positive outlook for the technology sector.

Despite trade and supply chain risks, strong demand and a tight election race in China are providing reassurance for investors.

The 4% ten-year yield is causing some small cast-offs to struggle, but key semiconductor stocks are rising, indicating a strong economy and good job market.

One-day moves in equities should not be overanalyzed, even if they show a decline.

There is comfort in maintaining an overweight position in the US, particularly in the semiconductor sector.

The US corporate earnings landscape remains a key focus.