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META DATA ANALYSIS
Tech takes a backseat, China panic subsides as summer break continues

Tech takes a backseat, China panic subsides as summer break continues

The seasonal summer slowdown is here, with the start of August seeing a marked decline in overall trading activity. Continue reading to know what else might have caused this slowdown.

Last Updated: ‎‎‎‎‏‏‎ ‎
November 17, 2021

This week’s update is co-authored with Novia Raihanah (Head of Data Operations) and Zhang Zhenyi (Manager)

Summer break started early this year

The seasonal summer slowdown is here, with the start of August seeing a marked decline in overall trading activity. As you can see from the chart below, this year’s summer break started early, with the slowdown happening in August compared to September in 2020.

Overall activity levels in 2021 have also been lower than those last year.

Weekly Investor Net Buy/Sell by Asset Class since Jan 2020 (source: Canopy Data and Analytics)

Tech lost some shine in the last 2 weeks

You may have noticed that S&P 500 has outperformed the tech heavy NASDAQ composite in the last 2 weeks. This is also reflected in investor activity where we saw some selling in Technology stocks two weeks in a row, for the first time since May

Tech has seen a net Sell for 2 weeks in a row for the first time since May this year (Source: Canopy Data and Analytics)

However the Investor sentiment for the broader market is benign. Communications and Consumer Cyclical sectors (in orange and beige above respectively) continue to be the strong favorites. The VIX ‘Fear’ Index (see below) carries on trending down, signaling a recovery in investors’ confidence in equities. Along with the trend, Consumer Non-Cyclical sector has also recovered.

VIX 30 day chart (source: Bloomberg)

Recovery in China related Stocks and Funds

Our last post at the start of the month highlighted the selling of Equities (alongside Fixed Income). In particular, we saw a brutal carnage in the selling off of China-related securities. Both of these have run their course. Selling of China focused funds has stopped and there we are seeing some buying in HKD denominated stocks.

There is no activity on China focused funds for the last 2 weeks (Source: Canopy Data and Analytics)

Sector-wise, the recovery for China-related equities has been largely Communications-related. Diversified Financial stocks have seen a renewed buying in the last week, with Consumer Cyclical stocks bringing up the rear.

However, lingering uncertainty from the crackdown have seen investors shying away still from China’s technology stocks (in dark grey below). A wait-and-see approach has been employed, with investors neither buying nor selling these stocks in the last two weeks.

We are starting to see normal buying volumes in HKD denominated stocks (Source: Canopy Data and Analytics)

Conclusion (tl;dr)

  • Slowdown in overall trading activity is seen, signaling the early arrival of Summer Break
  • Technology stocks seem unpopular, with sustained selling seen in its second week despite a strong performance from the broader market
  • Some recovery for China-related equities/funds despite ongoing concerns from the Chinese Government’s regulatory crackdown

Please note that this newsletter is just a data analysis of actual investor behaviour and does not constitute investment advice in any form.