After a long period of weakness, Chinese technology stocks have started to rebound.
Last month, for example, many Chinese tech stocks, including the likes of Tencent and Alibaba, delivered double-digit gains. Is the worst over for this area of the market? It could well be.
Crackdown on gaming companies appears to be easing
One major positive point for Chinese tech stocks is that Beijing’s crackdown on gaming companies appears to be easing. After freezing game approvals last summer, regulators approved 70 new games for release in November, including Tencent’s “Metal Slug: Awakening.” This marked the tech giant’s first commercial game licence in a year and a half. On Tencent’s Q3 earnings call, President Martin Lau said that he expects game licences to be approved relatively quickly in the future. This is very encouraging.
Meanwhile, the China Game Industry Group Committee — which is affiliated with China's gaming publishing regulator — recently published a report praising progress made on reducing gaming addiction among young people under the age of 18. The report singled out major Chinese gaming companies including Tencent and NetEase — both of which now use facial recognition to determine whether those playing their games are adults — for their moves in this space. This is another positive development as regulators were very concerned about gaming addiction across the country. This report could signal a better outlook for the Chinese gaming sector going forward.
Easing of strict COVID-19 measures could also help Chinese tech stocks going forward.
On November 11, Beijing announced a number of new measures aimed to alleviate economic pressures associated with lockdowns. The measures included shortening quarantine periods, removing quarantine for indirect close contacts, and the removal of the “circuit breaker” scheme for inbound flights — where airlines faced a suspension of flights if they brought in too many Covid-infected passengers.
While there is still a lot of uncertainty associated with China's Covid policies, the policy shift signals a move away from trying to eliminate the virus completely towards forming an exit plan for the zero-Covid policy. This is a major development and investors are viewing it as a game-changer for Chinese stocks.
It is worth pointing out that after large share price falls in 2022, valuations in the Chinese tech space are generally quite low. For example, Alibaba is currently trading at just 10 times this financial year’s forecast earnings. At the same time, selling pressure is dwindling, as bearish investors have already shifted their money out of the sector to sectors more favoured by Beijing such as healthcare. This suggests that the outlook for tech stocks could be attractive from here on.
Climate change — which can be defined as the rise in global temperatures driven by human-induced emissions of greenhouse gases and the resulting large-scale shifts in weather patterns — is one of the greatest challenges the world faces today. It is affecting every single country in the world and disrupting economies and lives in the process. Last month, the 27th annual United Nations Climate Change Conference (COP27) took place in Egypt. Here’s a look at what this conference is all about and what was achieved this year.
The United Nations Climate Change Conferences are annual conferences designed to assess progress in dealing with climate change and to launch new initiatives to combat the problem. They are used by governments to agree on policies to limit global temperature rises and to adapt to the impact of climate change.
Over the years, a number of major milestones have been achieved at United Nations Climate Change Conferences. For example, at COP3 in 1997, which took place in Kyoto, Japan, the Kyoto Protocol was signed. This was the first agreement between countries to mandate reductions in greenhouse gas emissions. It required industrialised countries and economies in transition to limit and reduce greenhouse gas emissions in accordance with agreed individual targets.
Meanwhile, at COP21 in 2015, which took place in Paris, France, negotiations resulted in the adoption of the Paris Agreement. This is a legally binding international treaty on climate change that aims to limit global warming to well below two degrees Celsius. Under the Agreement, each country must determine, plan, and report on its contributions. The emission goals of the Agreement require all parties to reduce their carbon footprints by more than 50% by 2030 and eliminate them by 2050.
It is worth pointing out, however, that progress has not always been achieved in a linear fashion. For instance, in 2007 at COP13 in Bali, guidelines were established for an accord to extend the Kyoto Protocol after 2012. But, then, in 2009 at COP15 in Copenhagen, parties failed to reach an agreement on the successor to the Kyoto Protocol.
As for COP27, the main achievement was a historic deal to create a “loss and damage” fund to pay poorer nations for the harm caused by climate change.
The aim of this fund is to compensate developing countries — that are vulnerable to the adverse effects of climate change — for losses arising from droughts, floods, rising seas, and other disasters associated with the problem. This deal was seen as a major achievement.
Yet, while many praised the creation of the loss and damage fund, others expressed concern that not enough was done at COP27 to reduce greenhouse gas emissions. Some countries’ representatives said commitments on limiting temperatures to 1.5C represented no progress over COP26, held in Glasgow in 2021, and that the language on phasing out the burning of fossil fuels — a driver of the climate crisis — was weak.
Consequently, some diplomats are already gearing up to ensure that COP28, which is due to be held in Dubai next year, does more to speed up the global shift to clean energy. It is worth noting here that the United Arab Emirates (UAE) has set a target of reaching net-zero emissions by 2050 and is increasingly investing in cleaner sources of energy such as green hydrogen and solar energy. However, at the same time, the UAE — which is one of the world’s largest oil producers — has made it clear that it sees an ongoing role for oil in the energy transition.
Those interested in gaining exposure to companies fighting climate change may want to check out eToro’s Renewable Energy Smart Portfolio, which provides access to a wide range of companies in the clean energy space. Alternatively, they may want to take a look at our new ESG-Leaders Smart Portfolio, which contains companies doing their bit to look after the environment.