Recently, Wall Street’s concerns about the Chinese economy have led to a decline in the overall performance of Chinese concept stocks listed in the United States, as reflected in the Nasdaq Golden Dragon Index, which has dropped by about 20% from its high in May. In comparison, the Nasdaq 100 Index rose by 2.2% during the same period.
According to data compiled by Bloomberg, the long-term price-to-earnings ratio of the Nasdaq Golden Dragon Index, tracking the largest Chinese companies listed in New York, is nearing its historical low compared to the technology sector index.
Due to the contraction of the Chinese real estate market and the worst economic downturn in five quarters, foreign investors are becoming increasingly cautious about buying Chinese concept stocks. In recent weeks, China’s biggest e-commerce companies, including Alibaba and the parent company of Pinduoduo, Temu, reported second-quarter revenue growth below expectations, further undermining foreign investors’ confidence in the Chinese economy.
Last Monday (August 26), Pinduoduo released its second-quarter financial report ending on June 30, showing revenue below market expectations. The market reacted strongly to this news.
Pinduoduo’s US-listed stock plummeted in pre-market trading, dropping by over 28%, marking its largest single-day decline since its listing in the United States in 2018, and causing a nearly $55 billion shrink in market value. Last week, the company’s stock in the US plunged by 33%.
On Saturday last week (August 31), Goldman Sachs Group Inc. released a research report stating that as of the end of July, only 5.2% of global mutual funds had allocated funds to Chinese stocks, reaching the lowest level in nearly a decade. Goldman Sachs indicated that long-term fund managers reduced their holdings in Chinese concept stocks in July before the start of the second-quarter financial reports.