Chinese data security stocks surge on Crowdstrike’s update

Chinese data security companies saw a surge in their stock prices on Monday, fuelled by speculation that a recent software malfunction at global leader CrowdStrike could create an opportunity for domestic players.

Shenzhen GuoHua Network Security Technology Co. surged 10 per cent in Shenzhen on Monday, while Hunan Kylinsec Technology Co. rose 17 per cent before pulling back.

Shares of 360 Security Technology Inc. also saw a 5.9 per cent increase. This surge comes in contrast to the broader Chinese market, where major onshore benchmarks declined after a disappointing Third Plenum outcome.

The rally appears to be driven by hopes that the global IT meltdown caused by a faulty CrowdStrike software update might open doors for Chinese alternatives. However, analysts caution that the gains may be short-lived. Many experts believe Chinese data security firms still lack the technological prowess of their larger global peers.

Chinese data security companies still have a way to go in technology and research compared to global leaders, according to Shen Meng, a director at Beijing’s Chanson & Co. Policy support is helping them stay competitive in the domestic market.

Despite a surprise rate cut by the People’s Bank of China and corresponding reductions in lending rates, the CSI 300 Index closed lower on Monday.

The lack of significant economic stimulus measures announced at the Third Plenum further suggests that the Chinese stock market may struggle in the near future.

Attribution: Bloomberg