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Nasdaq plunges: Is this an opportunity to buy ASX tech shares?

The United States (US) markets have experienced a sharp downturn as US–China trade tensions escalate, and the S&P/ASX 200 (INDEXASX: XJO) index is likely to follow. Here’s a look at how the markets have fared in the past three trading sessions:

  • Dow Jones Industrial Average (INDEXDJX: DJI) index is down 785 points or 2.88%
  • Nasdaq Composite (INDEXNASDAQ: IXIC) index is down 288 points or 3.50%
  • S&P 500 (INDEXSP: INX) is down 85 points or 2.80%

The global economy sits on a knife’s edge – on the one hand, there are no major alarm bells of an imminent recession; however, slowing global economies, geopolitical tensions and progressive interest rate cuts are concerning signs of what could lie ahead.

However, I believe that the markets still have plenty of kick left, and that the pullback trend is truly your friend. Once the noise subsides these pullbacks are buying opportunities, so here are four ASX tech shares that should be on your watchlist.

Afterpay Touch Group Ltd (ASX: APT)

The Afterpay share price tumbled on Friday, falling almost 4.0% to close at $25.49 and has fallen again in morning trade to be trading for $25 per share at time of writing. I believe Afterpay is strongly positioned to execute on its mid-term strategy of achieving $20 billion in gross merchandise value by FY22. The company has demonstrated strong compliance and confidence in the outcome of the AUSTRAC investigation. Furthermore, the Afterpay co-founders have promised to no longer sell any shares during FY20. Executive sell downs in the past have proved damaging to the Afterpay share price.

ZIP Co Ltd (ASX: Z1P)

I promise I’m not picking on buy-now-pay-later stocks. The Zip quarterly update was impressive with the company exceeding all financial target set at the beginning of FY19. The company continues to expand its partner base, signing Big W last Thursday. I believe the Zip share price has shown a lot of stability in light of the noise from the broader market and a buy opportunity may be present, given its strong quarterly report and growth initiatives.

Rhipe Ltd (ASX: RHP)

The Rhipe share price leaped 20% back in mid-June when the company announced an upgrade on its operating profit guidance. After these strong results the company decided to continue investing in the business during FY20, with an expansion in operating expenses to fund sales growth, market and Rhipe’s own intellectual property initiatives. I believe the company is in a strong expansionary phase and further investment in its own growth is a reflection of its future ability to deliver meaningful growth and returns.

Xero Limited (ASX: XRO)

The Xero share price has gone from strength to strength following a strong FY19 performance. I believe the share price will continue this momentum, particularly following an ‘outperform’ rating from Macquarie Equities with a target price of $76.50. Investors should treat any short-term weakness as an opportunity to consider buying this strong growth stock.

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Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia owns shares of AFTERPAY T FPO and Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.