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China’s regulatory crackdown on tech could last decades, but that’s not likely to deter long-term investors from putting money in them, predicts GFM Asset Management’s Tariq Dennison.
“If you ask me I’d say, give it at least another 20 or 30 years,” Dennison told CNBC’s “Squawk Box Asia” on Monday when asked how much longer the months-long crackdown could last.
“All this has happened in stages – look how far tech regulation has come in just the past 30 years,” the wealth manager said. “These things may look like they happen in steps, but there’re many, many steps over a very, very long road.”
Still, he doesn’t expect long-term investors to be deterred by the uncertain regulatory outlook.
“I would say right now, patient capital is actually buying more and more shares of Baidu, Alibaba, Tencent and JD because they’re looking at the long-term prospects,” Dennison said. Patient capital generally refers to investments that have a longer time horizon and are less speculative in nature.
“These tech companies are the babies that’ve been thrown out with the property bathwater, the babies that’ve been thrown out with the regulatory bathwater,” he added.
Dennison said China’s tech giants could actually stand to benefit from any new legislation.
“If you ask me, newer regulations are more likely to entrench these companies and to give them wider moats because Tencent is very, very likely to be able to adapt to any of these new rules, to find new ways to make money. And they have lots and lots of consumers to serve in a common prosperity model,” he said, referring to Chinese President Xi Jinping’s goal of spreading wealth.
“I often say, if you want a bull case interpretation of common prosperity, it’s basically trying to prevent a large gap from the haves and the have-nots, and ensure that the large consumer middle class, that they too will purchase services that the Baidu, the JD, the Alibaba are providing,” Dennison said.
— CNBC’s Arjun Kharpal contributed to this report.
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