China Tech’s stock pain is reflected in the widening gap with US giants

(Bloomberg) – The gap between megacap tech stocks in China and the US has been largest in at least five years as Beijing has a tighter grip on some of the country’s largest companies.

An equally weighted basket of China’s three internet giants collectively called BAT – Baidu Inc., Alibaba Group Holding Ltd. and Tencent Holdings Ltd. – fell about 2% in the 12 months to Friday, according to Bloomberg calculations. In contrast, an equivalent portfolio of their US counterparts – Facebook Inc., Inc., Apple Inc., Microsoft Corp. – rose. and Google’s parent company Alphabet Inc. (FAAMG) – up 40%, resulting in a 42 percentage point gap between the two groups.

Chinese tech stocks just suffered from their worst week in more than four months after national cyberspace regulation ordered app stores to remove Didi Chuxing and issued a sweeping warning to the country’s largest corporations, data security and oversight tighten foreign listings. Beijing has also proposed rules requiring almost all companies that want to be listed abroad to undergo a cybersecurity clearance.

The cohort saw strong gains Tuesday after Tencent’s acquisition of Sogou was cleared by China’s anti-monopoly regulator. Tencent was up as much as 5.1% in Hong Kong, Meituan was up 5.7% and Alibaba was up 4.8%.

In terms of key metrics, the Nasdaq 100 index has been trading at its highest level since it was officially launched in July last year compared to the Hang Seng Tech Index, which includes China’s largest tech companies.

This underperformance makes Asian stocks look relatively cheaper. Baidu, Alibaba and Tencent trade at an average of 21 times their estimated earnings, according to Bloomberg data. That’s compared to about 31 times for their US counterparts.

(Updates on China’s Tech Stock Moves in Paragraph 4)

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