BARGAIN hunters may want to think twice before piling into China’s beaten-down technology stocks.

While the industry rallied Friday on bets a US$732 billion selloff in the biggest Chinese tech giants had gone too far, history suggests there’s room for more downside.

Tencent Holdings Ltd., Alibaba Group Holding Ltd., Baidu Inc. and NetEase Inc. — among the earliest Chinese tech companies to enter public markets — still trade at valuations well above levels that marked the bottoms of the last two big downturns. The four stocks fetch an average 23 times projected earnings for the next 12 months, in line with the three-year average. The ratio dropped to 19 in 2018 and 18 in March 2020.

After soaring to record highs in February, Chinese tech stocks have tumbled in recent weeks due to a combination of rising interest rates and increased regulatory scrutiny in China and the United States.

For Kenny Wen, a wealth management strategist at Everbright Sun Hung Kai Co., it’s too early to declare an end to the rout even if some investors are jumping back in. (SD-Agencies)