M7, not great, but “harmful” opinion When Antibiotic Tech Rises 30% Nasdaq Is -6% Chinese version of M7 still undervalued 中 “It keeps going up” vs “The adjustment will come soon”
The “Magnificent 7” companies, which have led the U.S. stock market for years, are cited as the main cause of accelerating the decline in the U.S. stock market this year.
All of these companies have had negative returns this year. On the other hand, ‘Chinese version of M7’ companies increase their stock price gains by up to 60%, while their stock prices are still undervalued.
According to the financial investment industry on the 23rd, U.S. M7 companies are recording negative returns all at once this year. Compared to the beginning of the year, Nvidia and Tesla are losing 14% and 34%, respectively. Google (-12%), Apple (-10%), Amazon (-10%), and Microsoft (-6.5%) are similarly negative.
Meta (-0.5%), which had been on the Nasdaq for 20 consecutive trading days until the middle of last month, has also entered a loss section this month.
Some analysts say that the decline in M7 companies’ stock prices is preventing the U.S. stock market from rising. David Costin, a U.S. asset strategist at Goldman Sachs, lowered the S&P 500 index’s target for the end of this year from 6,500 to 6,200, saying, “Magnificent 7 is now Malicious 7.”
On the contrary, the Chinese stock market is literally on a roll thanks to the explosive stock price growth of large technology stocks. The Hang Seng Tech Index rose 29.4% this year, in contrast to the Nasdaq 100 in the U.S. at -5.8%.
BATX (Baidu, Alibaba, Tencent, Xiaomi), semiconductor foundry company SMIC, electric vehicle company BYD, and delivery platform company Meituan have all increased their stock prices this year.
Alibaba and Xiaomi have soared 60% this year, while SMIC has also jumped 61%. During the same period, BYD rose 37%, while Tencent (23%), Baidu (13%), and Meituan (11%) also rose all at once.
Pinduoduo (30%), Jingdong Dotcom (23%), Geocha (18%), Lenovo (15%), and NetEase (8%) are also on the rise when listing the “Terific 10” in the Chinese stock market.
In particular, despite the explosive stock price rise even before the first quarter, Chinese M7 companies are still found to be undervalued than the U.S. original M7.
As a result of a previous price-to-earnings ratio (PER) analysis comparing earnings expectations for the next 12 months with current stock price levels, all but Xiaomi (42) and SMIC (59) were undervalued than the same U.S. companies.
The preceding PER means that the higher the figure, the higher the stock price compared to the profits a company can earn.
The gap between BYD (23) and Tesla (89) of electric vehicle self-driving companies is about four times the leading PER gap.
Even comparing search engine-based Baidu (9) and Google (18), e-commerce companies Alibaba (13) and Amazon (29), Tencent (18) and Microsoft (26), the undervaluation of Chinese tech stocks was noticeable.
Among global investment banks, there is an evaluation that the Chinese stock market is cheaper than corporate fundamentals. UBS said, “The Chinese stock market is currently 20% off from other emerging markets.” JPMorgan also predicted that Chinese technology stocks will have an average annual return of 7.8% over the next 10 years.
However, some say that the arrival of a correction is inevitable as the Chinese stock market has risen sharply in a short period of time. Bank of America said on the 19th, “The Chinese stock market rally is similar to the 2015 case when stock prices plunged. A meaningful adjustment will come soon,” he observed.
In fact, the Hang Seng Tech Index fell 6.65% in two days from the 20th to the 21st, the largest decline since October last year.
Some predict that the direction of Chinese technology stocks’ stock prices in the future will vary depending on the improvement of their performance. “Long-term discounts by Chinese companies have been resolved,” said Kim Kyung-hwan, head of Hana Securities’ China and Shinheunggook stock division. “The market will raise its level of interest in improving fundamentals and return on equity (ROE).”
