Chinese and US tech stocks climb throughout the week on different engines

Tech stocks in China and the United States are exploding, albeit for different reasons. In China, an agreement between Washington and Beijing over their long-running audit disagreement sparked gains in Chinese tech stocks as their U.S. listings appear to be protected.

Meanwhile, in the US, hedge funds are betting big on mega-cap tech stocks with conviction levels approaching levels not seen since before the sell-off.

The MSCI Asia ex-Japan index fell from around 513 before the announcement of the agreement between Washington and Beijing to around 526 after the agreement. Meanwhile, the NASDAQ Golden Dragon China Index has risen 12% in the past five trading sessions following news of an impending deal, followed by the formal cementing of the deal.

U.S.-listed shares of Alibaba Group Holding Ltd (NYSE: BABA) have climbed 14% in the past five days, while U.S.-listed shares of JD.com are up 18% % over the last five trading sessions. . Pinduoduo grew by 29% over the same period.

The landmark agreement allows US regulators to review audits of Chinese companies listed on US stock exchanges, preventing a mass delisting of all Chinese companies listed in the US. Negotiations on this have been dragging on for more than 10 years.

SEC warns 'the proof will be in the pudding'

Five Chinese state-owned companies said earlier this month that they would choose to remove their shares from stock exchanges in the United States before being expelled in 2024 due to the impending ban. Despite the agreement, regulators in the United States have expressed caution about their ability to successfully enforce it.

In a statement, the Securities and Exchange Commission stressed that the framework set out in the agreement is "just one step in the process." SEC Chairman Gary Gensler added that it "would only make sense if the PCAOB could actually fully inspect and investigate" Chinese companies that audit Chinese companies.

If the PCAOB is unable to do so, approximately 200 Chinese companies will be banned from US stock exchanges if they continue to use these auditing firms.

Hedge funds stock up on mega-cap tech names

In the United States, hedge funds helped push the Nasdaq Composite up 9% and the Nasdaq 100 nearly 8% over the past month as they loaded up on mega-cap tech stocks. Goldman Sachs said in a recent report that hedge funds have reduced their overall holdings and increased the concentration of their portfolios by focusing on their most compelling names.

The company also said the average weighting of the top 10 holdings among hedge funds during the second quarter increased to 70%, the highest concentration since the first quarter of 2020. In fact, Goldman said the conviction had reached levels not seen since the start of the pandemic. Additionally, position turnover among hedge funds fell to an all-time low of 23%.

Hedge funds increased their positions in technology and consumer discretionary while reducing their holdings in energy and materials. According to Goldman Sachs, Amazon.com, Inc. (NASDAQ: AMZN) has replaced Microsoft Corporation (NASDAQ: MSFT) as the preferred long position among hedge funds. The fund managers also added to their positions in NVIDIA Corporation (NASDAQ:NVDA), Apple Inc (NASDAQ:AAPL), Tesla Inc (NASDAQ:TSLA) and Atlassian Corporation PLC (NASDAQ:TEAM).

Published first on ValueWalk. Read here.

Featured image credit: photo by Anna Nekrashevich; Pexels; Thanks!

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