2016 May Have Tech Investors Looking Back To The Good Old Days – Of 2015

May old acquaintance be forgot indeed. That old acquaintance, dating back to mid-year 2015, the Chinese stock market rout, reared its head the first day into the new year, and helped send shivers down the spine of the U.S. markets Monday.

Though stocks rebounded well off their lows on Monday, that 1.5 percent drop by the end of the day – after being off as much as 230 basis points intraday – probably didn’t do much to cheer investors. In the tech segment, the results were somewhat bifurcated, as large cap names, at least in some cases, finished in the black. That roster would include Apple, which landed a few basis points of gains.

Predictably, with China in investors’ sights, those companies that have the most to gain or lose in terms of top lines from the country and its neighbors, got hit the worst on Monday. Alibaba shares were down 5.6 percent on the day, with other companies such as Baidu and Tencent down less, at 3.6 percent and 2.3 percent, respectively.

Those companies, of course, are Internet firms, with recently announced pushes into new countries or product areas that include lending.  Hardware suffered a bit too, as Samsung, that bellwether of all things gadgetry related, slipped 4 percent on the Korean stock market, with the implicit worry that Android phones may see a divot in the road to getting more phones into more Chinese hands. Even Amazon, that marquee name of online commerce, got hit hard, off 5.8 percent.

Regardless of any new wrinkles in region or reach, these firms depend on the enthusiasm of the Chinese consumer, who traditionally has been an engine pulling the world economy, sometimes uphill, against the vagaries of a slowing of previously scorching growth rates in that country. The overarching theme are general ones but bear watching, yet again, at the dawn of 2016.

First, there’s a technical reason of sorts as to why China’s bourse may be in for a tough couple of weeks. The drawbridge that had been raised by the government roughly six months ago – where large institutions investors were curtailed from selling their stakes – will be lowered this week. In other words, we might see, if not a stampede, then a rush toward the exit as “smart money” looks to raise cash and wait for some clearer signs of where the economy and stocks might be headed. The fact trading curbs kicked in on the first day of the year does not bode well for investor psychology in China, professional or otherwise.

Then there’s the perhaps more fundamental problem of bad loans, which could range between $1 trillion to $2 trillion of possibly sour assets on the books.  And any real effort by banks and firms to disconnect from the loans themselves – selling them for pennies on the dollar, assuming there are takers, or writing them off altogether – will have a chilling effect on the economy altogether. The rippling impact would almost certainly slam consumer wallets shut. That scenario bodes ill for demand for online goods and services, and by extension cross-border payments, and by extension, payments firms themselves. Apple will certainly feel pain, and likely so will everyone else.

At this writing, the U.S. market has opened up flat, which, given Monday’s plummet, is better than nothing – and in fact nothing, which means flat, may be just enough to keep investors from hitting the panic button. At least today.

Keep an eye out for the forecasts that come from tech outfits, including Apple, Amazon, and the like later this month. They may not give a roadmap as to what’s to come, but they’ll give a lay of the land, with peaks and valleys related to China that may make 2016 a year to forget in tech investing.