HSBC Global Research Prefers Online Games Over Ads, E-commerce, and Local Services; TENCENT, NetEase, PDD, MEITUAN Favored

Summary:
- Earnings Growth as Key Driver: HSBC Global Research indicates that earnings growth will drive the next re-rating for the mainland internet industry.
- Stock Selection Framework Adjustments: The broker adjusted its framework by focusing on quality of growth, valuation mismatch, and shareholder returns.
Sector Preferences:
- Online Games: Preferred over advertising, e-commerce, and local services.
- Top Picks: $TENCENT(00700.HK)$ and $NTES-S(09999.HK)$ for online gaming.
- Advertising: Bullish on TENCENT's potential to leverage AI benefits.
- E-commerce: Favors $PDD Holdings(PDD.US)$ due to lower in-store competition and stabilizing average order value.
- Local Services: $MEITUAN-W(03690.HK)$ remains favored with strong growth in food takeaway revenues.