China Fund News reporter Yao Bo
China Internet, which has fallen sharply, finally turned against the wind and ushered in the best performance in history. Many stocks html doubled in 4 single month.
macroeconomic prospects, geopolitical and global liquidity improvements, coupled with the resonance of multiple factors such as the previous stock price oversold, jointly promoted the epic rebound of Chinese stocks listed in . In sharp contrast to
, some Chinese stocks listed in the first half of this year were labeled as "not investable". But the situation is stronger than others, and the strong rebound in the past month has directly slapped the "Abandoned Children" in the face.
Foreign capital turns to force short positions to cover , and the voice of long Chinese stocks listed in the United States has risen again. Some smart funds have completed the increase in operation before the rise.
Chinese stocks have a monthly increase of record
Nasdaq China Golden Dragon Index is the most representative index of Chinese stocks. November this year was the best month since its establishment in 2003, with a cumulative increase of 42.13%, far exceeding the second best performance of 20.14% in September 2007.
From the perspective of single-day performance, November did not have an extreme value of 32.93% rise in a single-day increase like March, but there were major increases many times this month, such as 9.62% rise on November 30, 7.78% rise on November 15, and 7.55% rise on November 10. Since December, the rise in China has maintained a rising pace. When the Nasdaq trend was weak on December 2, the Golden Dragon Index still rose by 5.39%.
From the perspective of component performance ranking, as of December 2, among all the best-performing stocks in the US, 11 of the stocks listed in the US have increased by more than 100%. These stocks have a large elasticity and a small and medium-sized market, showing a certain characteristic of oversold rebounding . However, the weight of the leading company has also contributed considerable growth. , Alibaba , the largest market value in Chinese stocks, has increased by 41.65% since November.
Since its peak in February 2021, the Nasdaq China Golden Dragon Index has experienced the longest and deepest decline since the index was established, with the maximum retracement reaching 80%. However, it reached a rebound of 40% in one month, and this wave set the fastest and largest rebound speed since this historic sharp drop. There are several factors that are driving this rebound differently than before, and the market may be witnessing a historic turning point.
Macro Fundamental Improvement
One of the main reasons for the rapid improvement of market sentiment is the continuous optimization of domestic prevention and control policies. Recently, Chengdu, Guangzhou, Tianjin, Beijing, Chongqing and Shenzhen have successively issued new implementation policies to reduce the inconvenience caused to the people due to the epidemic, and are expected to gradually improve the current consumption and business environment, greatly enhancing market confidence.
British asset management giant LGIM believes that the current consensus is that the existing restrictions will be gradually relaxed within the next 4 to 6 months, and the suppression of economic activities has been eased.
Chinese stocks listed in the United States may be one of the biggest beneficiaries of epidemic prevention and control optimization. Many Chinese companies are Internet technology companies, but their actual businesses belong to the consumer sector. The technology industry, whose stock prices have been hit hard, is closely related to the recovery of consumption.
is composed of the components of the Golden Dragon Index, and the proportion of optional consumption is the highest, reaching 74.4%, including many industry giants. For example, Alibaba, Pinduoduo, and JD.com and e-commerce companies have their business recovery directly rely on the consumption enthusiasm brought by revenue improvement; the car sales volume of the three new car-making forces, NIO , Xiaopeng and Ideal Auto , is also linked to revenue growth and consumption confidence. The performance of tourism and accommodation sectors such as Ctrip and Huazhu is directly related to travel prevention and control policies. In short, the performance of these leaders is directly affected by the improvement of the overall consumption environment.
After the government began to send out prevention and control optimization signals, the market's expectations for China's technology stock improved significantly. BNP Paribas said that China's Internet stock will be the main beneficiary of China's potential reopening, because this reopening will bring about increased consumption and increased business. Optimizing epidemic prevention and control and restrictions will prompt a rebound in economic activities, helping to increase advertising revenue and boost online shopping sentiment.
In addition, monetary policy tone tends to be marginal loose.People's Bank of China Governor Yi Gang recently stated that in order to stabilize growth and employment, 's prudent monetary policy has timely increased its implementation efforts. Recently, the People's Bank of China has cut the reserve requirement ratio by 25 basis points, guiding the market interest rate to decline.
, Bartolini, head of America research at State Street Global SPDR, believes that Chinese stocks are particularly attractive now. One is the depth of the decline, which is still quite attractive compared to emerging markets and global markets; the other is the improvement of liquidity. China is also one of the few places where the liquidity of the central bank is increasing in the global market. He suggested that in the context of the further eastward global GDP growth, re-increasing allocation of Chinese stocks listed in the United States can better reflect the direction of global GDP growth.
The overall external market has improved
Affected by the expectation of US inflation to peak and the expected rate hike of US dollar to hike to accelerate the decline, the sharp rebound of the entire emerging market is an external factor driving this round of Chinese rebound.
data shows that the US inflation rate fell more than expected in October, triggering a rebound in global equity and bond assets, and emerging assets performed particularly well. In USD, the JPMorgan Chase emerging markets bond index climbed 7.6% in November, the best month since 1998, while the MSCI emerging market index rose 14.6%, the biggest gain since 2009.
Since the beginning of this year, the rise in interest rates of in Europe and the United States has triggered a record outflow of emerging market assets, and there are signs that this trend is beginning to change.
According to JPMorgan's analysis of research company EPFR data, starting in mid-November, funds have turned into emerging market assets every week, breaking a series of capital outflows starting in August this year.
Bank of America believes that Feder may indeed stop rate hikes , causing funds to return to emerging markets. Although there are still some variables, because assets are priced in advance, when prices change, investors will flock to buy because they are afraid of missing out on opportunities, which will lead to this round of asset price rebound.
At the same time, with the improvement of geopolitical relations, the audit issues that plague Chinese stocks listed in the United States have also made significant progress in recent times. In August this year, a deal between China and the United States reached to allow officials from the accounting supervision committee (PCAOB) of US listed companies to inspect the audit books of Chinese companies. PCAOB officials arrived in Hong Kong in September to audit Alibaba, Yum China , JD.com and other companies. On November 16, SEC announced that PCAOB may announce their inspection results by the end of the year.
, Jinrui Fund, which has a heavy holding in Chinese stocks listed in the United States, said that in view of the increasingly positive atmosphere that the leaders of China and the United States have shown their optimism about the continued listing of Chinese stocks listed in the United States.
The company's performance has shown a turning point
Back to the company level, the performance of many Chinese companies has shown a turning point, or is sending out positive signals of performance shifts. The market is quickly correcting expectations and stock prices are also adjusting quickly.
As one of the three young players in the new force, Xiaopeng Motors html fell 77% in 4 years, ranking last among the new Chinese car-making forces, but the latest third-quarter report has given the market a glimpse. Xiaopeng Motors' revenue in the third quarter was RMB 6.82 billion, while rose 19% year-on-year compared with , and its net loss was RMB 2.38 billion, narrowing from RMB 2.7 billion in the second quarter of this year. At the same time, the scale of cash and equivalents reached 40.1 billion yuan, and cash flow was still abundant. Although the improvement in revenue and gross profit margin in the third quarter was not ideal, the market has seen hope of a turning point in performance from the improvement of delivery volume.
At the performance communication meeting held by Xiaopeng Motors on November 30, the company was optimistic about its delivery expectations in December, saying it was expected to return to the monthly delivery level of 10,000 units, and the overall delivery volume in the fourth quarter is expected to be between 20,000 and 21,000 units. In comparison, the company's car delivery volume in October was only 5,101, and the total delivery of about 104,000 vehicles from January to October this year. Under optimistic guidance and the improvement of the market environment, Xiaopeng Motors soared 55.99% within 3 days after the release of its quarterly report.
Another company that has significantly reduced losses is the content platform Bilibili (also known as B station).On November 29, Bilibili released its third-quarter report, with revenue in the quarter reaching 5.79 billion yuan, an increase of 11% year-on-year, and a net loss of 1.71 billion yuan, a year-on-year narrowing of 36%, the lowest loss since mid-year last year.
Benefiting stocks have exploded in performance
In addition to the sharp rise caused by expectations of improvement in performance, it also has representatives of Chinese stocks listed in the US that benefit from a weak economy. In the downward cycle of the economy and the environment of weak consumption, consumers' demand for affordable products on the Pinduoduo platform has increased. The third quarter financial report of 2022 shows that Pinduoduo achieved revenue of RMB 35.5 billion, a year-on-year increase of 65%; net profit of RMB 10.59 billion, a year-on-year increase of 545.6%. This profit performance not only contrasts with Alibaba's net loss of over 20 billion yuan during the same period, but also far exceeds JD's performance of RMB 6 billion in the same period. After the domestic business continues to achieve high growth, Pinduoduo's next step is an overseas market that many e-commerce giants have failed to win.
On September 1, 2022, Pinduoduo's cross-border e-commerce platform Temu was officially launched, continuing the low-price strategy that Pinduoduo relies on for success in China, focusing on the US market and becoming widely popular. Currently, Temu ranks first on the shopping application download list in the United States iOS system. Pinduoduo management said that Temu currently has little impact on overall revenue, but is trying to tell a good internationalization story that is popular among in the capital market. Five trading days after the
performance was released, Pinduoduo rose 31.32%, and its stock price hit a new high this year, making it the largest large-scale Internet Chinese stock with the best stock price performance this year. Pinduo rose 48.10% in many years, with a market value exceeding the 100 billion US dollar mark. It is the most eye-catching blue-chip stock among Chinese stocks this year.
Foreign capital shifts to
With the improvement of the environment, the market has generally raised the growth expectations of Chinese companies. The institutional broker evaluation system shows that analyst increased the 12-month forward earnings of MSCI China Index companies by 2% in November. The above-mentioned institutional data also shows that the profits of large and medium-sized Chinese companies with a market value of at least US$1 billion are expected to rise by an average of 17.3% in 2023. Among all industries, optional and major consumer are leading in next year's earnings forecasts, with both expected net profit growth of 35%, and industrial and technology companies are expected to achieve 30% and 23% growth, respectively.
UBS also analyzed and pointed out that the MSCI China Index is predicted to grow profits next year to 15%~20%, which will be supported by declines in commodity prices, improved economic growth and reduced asset write-downs, which may push the market's total shareholder return rate to 25%~30% next year.
Chinese stocks are recovering rapidly, forcing funds to turn. According to data from financial analysis firm S3 Partners, investors who short may bet on Chinese stocks listed in the United States were forced to to cover 's positions in November with more than $870 million. In contrast, the net short selling of in October was US$1.26 billion.
In addition, many funds invested in China's fund in the overseas market have turned into regular funds. Funds flowing into Jinrui China Internet ETF turned positive in November, the first time in nearly five months, and its call options also hit a new high since June this year. On November 30, the single-day funds flowing into iShares' large-scale Chinese ETF reached US$105 million, the highest since March this year.
Judging from the recent adjustments of institutions, many overseas funds increased their holdings in Chinese stocks before the big rise. Morningstar data shows that as of the end of October, JPMorgan's Chinese funds increased their holdings in Alibaba by 18.11%, JD.com by 4.05%, Meituan 1.59%, and Pinduoduo by 1.76%. In addition, Fidelity China Consumer Fund, a subsidiary of Fidelity, has held a heavy holding in the third quarter including Alibaba, Meituan-W, JD.com, , Ctrip , etc., among which Alibaba increased its holdings by 3.38 percentage points.
However, some analysts say that before the turnaround in technology stocks continues, we still need to pay attention to the rebound in actual consumption. Baring Asset Management said that the recovery of earnings of Chinese stocks listed in the United States is still the key, and they will only consider purchasing Chinese e-commerce and mobile game stocks when there is a meaningful recovery, which may not be until the second half of 2023.
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