The massive selloff in U.S.-listed shares of Chinese technology companies isn't linked to their fundamentals and makes for a bigger buying opportunity, according to Citigroup Inc.
The brokerage reiterated buy ratings on Baidu Inc., Tencent Music Entertainment Group, and Vipshop Holdings Ltd. following what it called an 「unfortunate dislocation」 of their share prices.
"While we are not sure whether the huge volatility of share price movement of many technology stocks during the last few days could trigger more forced selling pressure or de-risk selling sentiment from other funds in the next few days, we do believe and are reassured that none of the sell-down is fundamental related," Citi analysts including Alicia Yap wrote in a note.
Citi's view comes after Friday's unprecedented selling in some U.S. stocks ranging from Chinese technology giants to American media conglomerates by the family office of former Tiger Management trader Bill Hwang, whose Archegos Capital Management was forced by its banks to sell more than $20 billion worth of shares after some positions moved against Hwang, according to two people directly familiar with the trades.
Gary Dugan, chief executive officer at the Global CIO Office in Singapore, echoed Citi's view on the tumble in Chinese tech shares.
"We would look at the selloff as technical and exaggerated and hence a long-term buying opportunity," he said.
Tencent Music, whose ADRs slumped 37% in the last three sessions, announced a $1 billion share buyback on Monday. Baidu has approximately $2.78 billion outstanding share repurchase programs that it could use for buying back the shares, Citi analysts wrote in a note.
"Baidu's growth outlook remains promising," they wrote.
Citi's price target of $364 on Baidu's ADRs implies a potential upside of about 75% from Friday's close.
Baidu's stock, which made its debut in Hong Kong last week, swung between gains and losses early on Monday. The Hang Seng Tech Index was down 0.3%.