This Alibaba mascot in Shanghai has reason to smile: Big Asian tech stocks have been on a tear lately.
Photo: alex plavevski/ShutterstockThis summer’s big rally in technology stocks hasn’t been limited to America. Shares of some Asian tech giants have also climbed to new heights, powering gains in major market indexes.
Chinese internet titans Tencent Holdings Ltd. TCEHY 1.77% and Alibaba Group Holding Ltd., BABA 1.03% which both hit record highs in July, are up 48% and 24% for the year, respectively. At the close of Hong Kong trading Thursday, Tencent’s market capitalization was $687 billion and Alibaba’s was $712 billion, in the neighborhood of Facebook Inc.’s FB -0.28% $710 billion as of Wednesday’s close in New York.
Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co. TSM 1.80% have also jumped in the past three months. They are a big reason why South Korea’s Kospi index is back in positive territory this year and Taiwan’s Taiex index is at a record high—the companies are big components of their market benchmarks.
The run-ups have been fueled by strong profit or revenue growth during the coronavirus pandemic, which has kept many people at home, online—working, meeting, shopping and playing games. Analysts and investors say Asia’s tech surge in has broadly tracked a run by major U.S. technology companies that have similarly benefited from pandemic-related business closures and lockdowns.
Some Asia tech companies are cheaper than their U.S. peers, they note, making them potentially more attractive. Alibaba has a forward price-to-earnings ratio of 27.7, for example, versus 85.4 for Amazon.com Inc., according to FactSet. Samsung’s ratio is lower than Apple Inc.’s.
“These companies are low-hanging fruits that (people) can easily invest in to play catch up, especially if they think they have missed the opportunities in the U.S. market,” said Francis Tan, an investment strategist at UOB Private Bank in Singapore.
Manish Nigam, head of Asia Pacific technology research at Credit Suisse, said increasing trade and political tensions between the U.S. and China are both a risk and an opportunity for Asian tech companies.
The U.S. has restricted Chinese telecom giant Huawei Technologies Co. and blacklisted some of the country’s other tech companies. “If the U.S.-China relationship continues to get uglier, then tech could get hurt,” Mr. Nigam said.
But the rising tensions are also spurring Beijing’s efforts to increase its domestic technological capabilities by doing more to support the growth and development of homegrown companies.
Since a market trough in March, a Dow Jones index of Asia Pacific technology stocks has climbed 58%, giving it a gain of about 23% for the year. Asia’s most valuable tech stocks are also sizable components of the MSCI Emerging Markets index, which has gained over 40% since March, though it is slightly down for the year.
The share price of Meituan Dianping, 3690 1.28% a nearly five-year-old Chinese company whose internet services include food ordering and delivery, online vouchers and travel bookings, has more than doubled this year, raising its valuation to $165 billion—more than Grubhub Inc., Groupon Inc., Uber Technologies Inc. and Booking Holdings Inc. combined.
Even SoftBank Group Corp., 9984 -0.68% coming off billions of dollars in write-offs on big investment misses like WeWork Inc., has been on a tear, gaining 144% from its March lows. The global tech rally is lifting the other big holdings of the Japanese conglomerate and global technology investor, such as Alibaba. SoftBank’s share price recently hit a 20-year high, and the company is now buying back more than $20 billion of its own shares to boost it further.
Vikas Pershad, a portfolio manager at M&G Investments, said Asia’s tech giants are clear leaders in their sectors—whether e-commerce, gaming or chip making—and have invested heavily in research and development in recent years. That positions them to expand regionally and take advantage of the strong demand for their products and services, he said.
“The unprecedented shocks to both demand and supply and the unprecedented stimulus is an opportunity especially for the tech sector,” he said. “It will be very difficult for a new challenger to disrupt the incumbents.”
Whether the companies’ pandemic-related boost can be sustained longer-term depends on whether new online habits stick.
“Once people are comfortable with (online grocery shopping), they will probably do more,” said Anupam Bose, a portfolio manager at Clough Capital in Boston who oversees a China-focused stock fund. The outlook for online entertainment is less clear, he added: People may not have as much time for it when they return to their workplaces and resume other routines.
Write to Chong Koh Ping at chong.kohping@wsj.com
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