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23 August 2021

Tech Stocks Plunge While Vacancies are Buoyant

Last week saw China’s tech stocks plunge, as new regulatory laws related to privacy were passed. Honk Kong’s Hang Seng TECH Index of China’s Largest e-commerce stocks, including Tencent and Alibaba, dropped 2.5% due to new privacy laws, which will curb widespread data collection by technology companies, announced by the regulators.

After the news was published the Nasdaq Golden Dragon Index of large US-listed Chinese stocks fell 5% by the end of last Thursday’s session. The unceasing clampdown by the Chinese regulators resulted in the index losing approximately more than 45% from its February high of 11,000 to 6,000 points at the time of writing. Furthermore, the Chinese government hinted that more restrictions will be announced regarding online prescription drug sales in the healthcare sector. Healthcare tech companies such as Ping An Healthcare and Alibaba Health Information Technology saw their shares plummet 14.5% and 13% respectively.

With regular crackdowns and regulations imposed by the government, China is continuously making the foreign investor anxious. The concern most investors will have right now is what ongoing risks remain in owning a Chinese company and whether other industries will be next in the firing line from the Chinese Communist Party. On the contrary, profit making companies with robust growth drivers are now available to investors at huge discounts to their Western counterparts, and those who are brave enough have some potential rewards to reap from a bargain basement market. Nevertheless, recent events have demonstrated the need to invest for the long-term in the region and accept there will be such unexpected bumps in the road.

Looking towards the UK, recent data has shown an increase in jobs vacancies by 53%. While this presents a positive story on the one hand, it is expected that business may face labour shortages in the wake of the pandemic and Brexit - an added pressure on wages and inflation. The Association of Professional Staffing Companies suggested the government review its post-Brexit immigration policy in order to avoid any potential skill drain and introduce new immigration policies to ease the passage to the UK for independent professional workers, on a project-by-project basis. Labour shortages in the country will drive wages and inflation and may result in the Bank of England tightening interest rates sooner than expected.

Closer to home, Warrington-based consumer technology business Tactus Group secured a £40m investment from Chrysalis Investments, a Hybrid Private Equity investment trust. With the fresh round of investment, this makes the present deal the largest funding round following £12.5m injection by Arete Capital Partners in April 2021. The investment of £40m will boost Tactus’ plans of global acquisitions and partnerships to expand further. The company has increased its head count significantly over the past 12 months and aims to expand its team at all levels in the foreseeable future.

Please note that investments and income arising from them can fall as well as rise in value. This communication is for information only and does not constitute a recommendation to buy or sell the shares of the investments mentioned.
 
Tech Stocks Plunge While Vacancies are Buoyant
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