Golden Dragon China Index Crashes 13% After JPM Downgrades Chinese Internet Sector, Tells Clients To Avoid For 6-12 Months

Adding insult to injury, just hours after a record crash in the Hang Seng Tech index which dropped 11%, or the most ever…

… as Chinese companies traded in Hong Kong suffered their biggest drop since the global financial crisis, as panic selling gripped swept across local investors, and the Hang Seng China Enterprises Index closed down 7.2% on Monday, the biggest drop since November 2008…

… on Monday morning the Golden Dragon China Index cratered as much as 13%, bringing the two-day drop to just under 30%…

… after JPMorgan recommended investors “avoid China Internet on a 6-12 month view.” From the note

As risk management becomes the most important consideration for global investors in relation to their China Internet investment strategy as they price in China’s geopolitical risks and incremental concerns about regulatory risks, we find China Internet unattractive on a 6-12 month view with an unpredictable share price outlook, depending on the market perception of China’s geopolitical risks, macro recovery and Internet regulation risk. The sector-wide sell-off might continue given lack of valuation support in the near term, in our view. We downgrade 28 coverage stocks to Neutral or Underweight. The only name with an OW rating in our coverage universe is Kuaishou.

JPM’s reversal, which comes a little over a month after JPM said it saw “clear business opportunities” among China internet stocks, merely confirms the price action and if anything suggests that with the bottom having fallen out of the sector, now is the time to buy China internet stocks.