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Why Shares of 360 DigiTech Are Rising Today

What happened

Shares of the Chinese fintech 360 DigiTech (NASDAQ: QFIN) were nearly 12% higher as of 3 p.m. ET today, as inflation eased in China.

So what

While inflation has been surging in the U.S., China's consumer price index only grew 1.5% in December from one year ago, falling short of the 1.8% expected in a Reuters poll, and less than the 2.3% increase in November.

Image source: Getty Images.

"Lower inflation opens room for the government to loosen monetary policies further," Pinpoint Asset Management's chief economist, Zhiwei Zhang, wrote in a recent research note, according to CNBC. "The probability of interest rate cut is rising, in our view." Stocks in Hong Kong, China, Japan, South Korea, and Australia also rose on the news.

Lower inflation and rate cuts can often be beneficial for tech and growth stocks because they typically result in lower yields on risk-free assets, making investors keener to take risks. A lower-rate environment also makes the cost of running a company cheaper, and in 360 DigiTech's case, the company is more likely to see an increased consumer appetite for loans.

Now what

While 360 DigiTech is in the banking business, it serves more like the intermediary connecting financial institutions with consumers, so it will likely continue to trade more like a tech stock.

I don't invest in Chinese stocks because I think it requires an in-depth understanding of the regulatory environment. But a lower-rate environment with less inflation tends to be more supportive of tech stocks, so I do see this news as beneficial for 360 DigiTech.

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Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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