Chinese tech stocks are now a buy, say pros

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The plunge in Chinese tech stocks might have concerned some investors, but the pros are taking advantage of what they say is a smart buying opportunity.

On Friday, the Shanghai composite surged nearly 5 percent, adding to even stronger gains from Thursday. China this week instituted new supportive measures, including restrictions on short selling.

Still, the market has suffered a severe swoon this summer. The selloff had wiped out more than 30 percent of the index's gains from its June 12 closing peak. That kind of volatility understandably can rattle investors, who fear that the decline in the stock market leads to a slowing of the broader Chinese economy, which could mean weaker sales for companies doing business there.

However, some investors specializing in technology companies aren't selling: In fact, they're using this weakness to buy Chinese tech firms.

"I am stunned by the opportunities that I see," Joshua Spencer, manager of the T. Rowe Price Global Technology Fund, told CNBC. "I buy stocks where the fundamentals are solid, yet the market has an issue. That strategy will work this time as well."

Spencer has managed the fund for three years. Over that time, the fund's annualized return of 25 percent has beat 99 percent of its rivals, according to Morningstar.

Right now, Spencer told CNBC he is using this weakness to carve out bigger stakes in companies such as, a Chinese e-commerce company, as well as, where he remains very bullish.

"It is the No. 1 online travel company in China, and it's growing [sales] at nearly 50 percent," said Spencer. "In comparison, Priceline is a $60 billion market franchise. Ctrip could do the same in China." (The company's current market cap is $10 billion).

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The stock selloff may also create buying opportunities in American tech companies with exposure to China. This week, Scott Kessler, an analyst at S&P Capital IQ, upgraded Yahoo to "strong buy" because of its stake in Alibaba.

"The Internet segment in China benefits from cyclical growth as well as secular trends," Kessler said. "More people are getting online and buying goods and services."

The assumption among bullish analysts and investors is that the Chinese stock market downturn won't bleed into the broader economy. For now, economists differ on whether that will happen.

UBS, for one, sees a "limited impact" on the broader economy, noting that equities in China account for 20 percent of household financial wealth, or just about 12 percent if property is included. Moreover, economists there contend that the correlation between consumption and stock prices is ambiguous.

For that reason, UBS remains bullish on Apple, though noting that Greater China has provided over half of the tech giant's recent revenue growth.

On the other hand, strategists at Bank of American Merrill Lynch contend that the ripple effect from the market correction has yet to show up. But they expect slower growth, poorer corporate earnings and a higher risk of a financial crisis.

So, where does that leave investors?

For his part, T. Rowe's Spencer is sticking with a time-tested strategy: Searching for Chinese companies boasting talented management teams, strong growth and competitive advantages while also keeping a close eye on economic indicators.

If, for instance, Chinese auto sales suffered a steep and sustained plunge, his investment strategy would shift.

"I would be worried about my China stocks," said Spencer. "But then I would be worried about everything else at that point too."