To The Moon

Recently, Chinese stocks have rebounded sharply.

?! 3 Signposts Showing CN stocks See Huge Upside Trend

Source From Bloomberg

$MEITUAN-W(03690)$ has risen 90% from its low point, $DiDi Global Inc.(DIDI)$ up 24%, $Kanzhun Limited(BZ)$ up 19%, $Pinduoduo Inc.(PDD)$ 5.6%, $Alibaba(BABA)$  and $JD.com(JD)$ up 6%.

There are three main reasons for the recent Chinese stocks rebound.

1. Regulation of Internet companies has eased
2. Chinese and U.S. authorities are actively negotiating on the regulation of Chinese stocks
3. Promulgation of a number of economic promotion policies to promote economic growth

People have their own views on the rebound of Chinese Internet companies. Some think it is just a short-term trend of oversold rebound, while others believe that Chinese stocks have finally reached a turning point.

JPMorgan’s Kolanovic Sees Buying Opportunity in Chinese Stocks.

So what is the future outlook for Chinese Internet companies?

Analysts believe:

Chinese Internet companies' value has returned. We shouldn't be pessimistic about Q2, and remain optimistic about medium and long-term trend.

1. Why not optimistic about Q2?

Analysts believe that their performance in Q2 may still face challenges under the continued influence of impaired consumer confidence and logistics disruptions due to the pandemic.

As of the end of March, the Internet giants - $TENCENT(00700)$ and $Alibaba(BABA)$ adjusted net income fell by more than 20% year-on-year. Among them, $TENCENT(00700)$ revenue recorded the slowest single-quarter growth rate.

Alibaba executives said

GMV in China retail market fell about 10% year-on-year in April due to the pandemic, and that users' spending patterns have changed.

The "retaliatory consumption" won't happen after the current round of the pandemic. In addition, supply chain problems will also take some time to digest.

2. Why not pessimistic about Q2?

With the opening of the "618" shopping festival, major e-commerce platforms, mainly $Alibaba(09988)$ , $JD-SW(09618)$ &$Pinduoduo Inc.(PDD)$, actively encourage customers to spend money, by issuing consumption vouchers to them.

In the face of a weak economy and supply and demand are both in trouble, China has recently launched 33 policies to stabilize the economy, stabilizing the increase of cars, home appliances and other bulk consumption.

In short term, the efforts of companies and governments are effective.

Analysts believe that

"People's expectations have been very low, and has price in the stock price. Therefore, it's not necessarily to be so pessimistic about Q2 performance."

3. Why optimistic about the medium and long-term trend?

Analysts said that

As the impact of policy factors on Internet companies weakened, the performance of Internet companies will reverse the downward trend.

As mentioned earlier, there are currently more positive signals from economic policies and overseas markets, and investors should focus on the competitive strengths Internet companies.

"In the Q3 & Q4, if the pandemic is controlled, the companies can return to a normal level of operation. The trend in the third and fourth quarters should achieve a gradual recovery and an upward trend."

Analysts believe that

These Internet companies are winners in a extremely competitive market environment. Under the fierce competition, Internet companies will continue to find their new growth point.

4. When is the turning point for Internet companies?

The turning point of the Internet industry performance will appear this year.

Q2 may become the bottom of the Internet companies, Q3 is expected to return to a stable growth. Internet companies have competitive strength and profitability levels, which will drive their share prices.