r/valueinvesting
NetEase keeps ripping while Alibaba and Baidu bleed, china tech isn't one trade anymore
China tech is fracturing as momentum shifts from lagging internet giants to hard tech, making single-stock picking a coin flip.
- Momentum has quietly shifted to hard tech and manufacturing sectors like batteries and AI chips.
- Rules-based baskets offer a way to capture the broad China tech rotation without single-stock risk.
- Internet heavyweights have broadly lagged and bled since March, breaking historical correlations.
- Sub-sector rotation is too fast and opaque, making single-stock selection akin to a coin flip.
I've spent the last couple months trying to build a China tech position and it's been genuinely frustrating. Since roughly March the internet heavyweights (Alibaba, Baidu, JD) have broadly lagged while NetEase keeps grinding higher and Tencent just chops sideways. They're all "China tech" but the correlation between them has completely broken down.
What caught me off guard is where the momentum actually rotated. CATL in batteries, Cambricon in AI chips, Mindray in medical devices. The sector leadership quietly shifted to hard tech and manufacturing, which is the part most popular single ticker China plays don't even cover. If you bought "China tech" through the internet names you basically missed the entire move.
That realization is what pushed me away from trying to pick the right name. When sub sector rotation inside one theme is this fast and this opaque, stock selection stops being analysis and starts being a coin flip. The catalyst that separates a NetEase quarter from a Baidu quarter isn't knowable in advance, at least not by me.
So I've been looking at rules based baskets. Stumbled on CNQQ from Rayliant while researching, about 100 holdings across A shares and HK, 10% single name cap, R&D weighting screen. Haven't bought it. It's under $20M AUM and less than a year old so, grain of salt. China single country and regulatory risk obviously still applies.
The rotation from internet to hard tech is the actual story in China right now and most of the obvious single name approaches are pointed at the wrong half of it.