Chinese stocks rebounded as Alibaba and more buybacks lift sentiment
Chinese stocks flirt with investors
Shares of $Alibaba (BABA.US)$ closed up 11% on Tuesday after the Chinese e-commerce giant announced it would increase the size of its share repurchase program from $15 billion to $25 billion.
On the following Wednesday, Alibaba's peer in China, $TENCENT (00700.HK)$ released its fourth and annual earnings report for 2021 and investors are expecting its buyback plans.
Key highlights from Q4 2021:
Key highlights from Q4 2021:
Revenues: +8% YoY, non-IFRS1 profit attributable to equity holders of the Company: -25% YoY
How will the market react to earnings? $Tencent (TCEHY.US)$(American Depositary Receipts) on the US market will answer for it, which is trading lower before the bell. However, as of Wednesday's close, Tencent had rebounded 30% from last Tuesday's panic-selling low of HK$297.
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Why did Chinese stocks start to rebound recently?
There are two particular headaches for Chinese stocks: domestic regulation and Sino-US differences. However, some changes over the past week should be noted by Chinese stock investors.
- Government support pledge
Chinese stocks have been on a recovery path since last week, as Beijing's aggressive push to stabilize financial markets and stimulate the economy.
Meanwhile, Chinese regulators are stepping up efforts to ensure domestic companies continue to list in New York, requiring companies that hold American depositary receipts to prepare more audit disclosures.
- Shrinking valuation
Before making any investment, you need to ask yourself: is this an upwards industry? Is the price reasonable?
Since Chinese government policy appears to be changing, now is a good time to ask these questions. Here are the 10-year P/E valuation ratios:
These stocks, especially those listed in the U.S., have become cheaper relative to their historical valuation levels.
- Buybacks to boost confidence
Chinese tech stocks extended their rally into the second week as share buybacks by $XIAOMI-W (01810.HK)$ and $Alibaba (BABA.US)$ sparked hopes that other tech companies might follow suit. Tencent, $JD.com (JD.US)$ and $MEITUAN-W (03690.HK)$ are among the watched list as they are sitting on huge cash piles and have pulled back sharply from all-time highs.
U.S.-listed Chinese companies have ramped up share buybacks this week, giving them a major boost to their recent rebound from the bottoms.
U.S.-listed Chinese companies have ramped up share buybacks this week, giving them a major boost to their recent rebound from the bottoms.
Are Chinese stocks worth investing in?
The bullish bets believe that the government's pledge of support will help revive Chinese stocks and instill investor confidence.
While bears warned that any sustained gains would require further policy support from the authorities that could taper off and provide an excuse for investors to sell short-term gains. In addition, the long-standing Sino-U.S. balance game will hang over Chinese stocks, which could
mean potential volatility in the future.
mean potential volatility in the future.
Charlie Munger is known to be bullish on China. When asked why they chose to invest in China, "we got more strengths per dollar invested. In China, the companies we invest in are stronger relative to their competition and priced lower. That's why we're in China,” Munger said.
Read more:
Could Chineses stocks rebound continue? Will share buybacks lift up share prices?
$DiDi Global (Delisted) (DIDI.US)$ $PDD Holdings (PDD.US)$
Read more:
Could Chineses stocks rebound continue? Will share buybacks lift up share prices?
$DiDi Global (Delisted) (DIDI.US)$ $PDD Holdings (PDD.US)$
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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