what happened
Several Chinese stocks trading on U.S. stock exchanges rose for no apparent reason, but bullish sentiment from Wall Street and recent Chinese macro news may be boosting the move. There seems to be
Shares of major Chinese e-commerce companies Alibaba Group Holding (Baba 3.04%) As of 2:22 PM ET today, it is trading more than 3% higher today. Shares of another Chinese e-commerce giant, JD.com (JD 3.92%)trading more than 4% higher, Tencent Music Entertainment Group (TME 7.50%) It is trading at a higher price than 8.4%.
So what
Chinese stocks struggled last week along with Hong Kong stocks. Hang Seng Index After the COVID-19 lockdown, the Chinese economy has continued to show signs of slowing throughout the year, losing about 3.6% over the past five days of trading.
Image Source: Getty Images.
On Monday, China’s central bank continued to cut key interest rates to boost the economy. The People’s Bank of China cut the prime rate for 5-year loans to 4.3% from 4.45% and also cut the prime rate for 1-year loans to 3.65% from 3.7%.
A week before Monday, the central bank cut the short-term bank lending rate to 2% from 2.1% and the one-year lending rate to 2.75% from 2.85%. The move comes after China’s retail sales and industrial production data in July were worse than expected.
Low interest rates tend to favor high-growth technology stocks because they can increase profitability and lower the cost of doing business. Also, when interest rates are lowered, investors tend to be more aggressive. However, it may take some time before rate hikes begin, regardless of which direction they go.
In other news, JD.com got positive sentiment from the streets today. First, The Benchmark Company analyst Fawne Jiang raised his price target on JD.com from $106 to $109.So city group Analyst Alicia Yap maintained her buy rating on the company, but analysts lowered their price target to $91 per share from $93.JD.com is now trading below $60 per share. are traded at
Yap said he believes the e-commerce giant will start growing revenue and users much faster once the pandemic is fully over in China. The bullish call came a day after JD.com announced its earnings and earnings for the second quarter of the year, easily beating analyst estimates.
So
China’s economy has been decidedly rough this year as severe lockdowns related to COVID-19 have hit growth. It could take time for Chinese stocks to recover, especially if there are other global macro issues.
But the Chinese government appears to be more supportive of its big tech companies in general. This is important.
Shares of Alibaba, JD.com and Tencent Music all fell sharply last year, so they could certainly rise if economic conditions improve. I think JD.com and Alibaba are two of the better positioned long term buyers in the sector.
Citigroup is an advertising partner of The Motley Fool’s Ascent. Bram Berkowitz has a position in his Citigroup with the following options: His $80 long call in January 2024 on Citigroup. The Motley Fool has a position on and recommends JD.com. The Motley Fool’s U.S. headquarters has a disclosure policy.