To The Moon

Summary:

• Giants and star stocks plummeted, while Chinese ADRs  bucked the trend
• Top 10 rebounding winners of ADRs Highlight
• Institutional outlooks on ADRs investing in 2023
• Chinese stocks 2023 trend prediction

From Investor Junkie

1. Chinese stocks rose against the market on Tuesday

On the first trading day in 2023, $Tesla Motors(TSLA)$ fell 12%, the worst performance in 2 years, and its rival $Rivian Automotive, Inc.(RIVN)$ fell nearly 6%, the lowest since its listing.

$S&P 500(.SPX)$ ‘s heavyweight $Apple(AAPL)$ drop 3.74%, fell below $2 trillion by market value for the first time since May 2022, it is reported that Apple's iPhone shipments dropped by 22% in December 2022.

Since the "2022 Santa Rally" missing, the decline of US stock market on the first trading day in 2023 has brought pessimism to the market. However, the Chinese ADRs rose against the market on Tuesday.

There are 25 ADRs increased more than 10% in prices. Among them, $Dada Nexus Limited(DADA)$ $Antelope Enterprise Holdings Limited(AEHL)$ , $NaaS Technology Inc.(NAAS)$ , $Gaotu Techedu Inc.(GOTU)$ , $Tuniu(TOUR)$ , $China Jo-Jo Drugstores(CJJD)$ , $EZGO Technologies Ltd.(EZGO)$ , and $GDS Holdings Ltd(GDS)$ had increased more than 15%.

Data from Tiger Trade, As of Jan 3rd.

The biggest gainer on Tuesday is Instant retail and delivery platform $Dada Nexus Limited(DADA)$ , it is no doubt that no matter what the economy is, local life services are a rigid demand. the company reported total revenue in Q322 reached RMB 2.4 billion, a yoy increase of 41% and its profitability continues to improve.It is expected that under China's reopening, the companies business will benefit from the promotion of the real economy, which may usher in better performance in 2023.

Some other named companies like $Bilibili Inc.(BILI)$ rose by more than 13%, $Gaotu Techedu Inc.(GOTU)$ rose by 22.88%, $Tencent Music(TME)$ rose by more than 6%, $Baidu(BIDU)$ rose by nearly 6%, and $JD.com(JD)$ rose by more than 4%.

2. Below are the list showing the top 15 winners in last 2 months of 2022

Data from Tiger Trade, By Wallstreet_Tiger

The highlight of Top 10 winners are as below:

1). The No. 1 performer $Bilibili Inc.(BILI)$ just hosted the 2022 New Year's Eve party. According to data, the peak live broadcast popularity reached 330 million that night, setting a new record, which stimulated bilibili to rise by nearly 14%, BILI has risen by 142% in the last two months in 2022. Its Q322 results showed its revenue reached RMB 5.8 billion increased by 11% year-on-year, and its net loss of RMB 1.7 billion narrowed by 36% year-on-year. $Bilibili Inc.(BILI)$ is working to reduce costs and increase efficiency. Interested investors can continue to pay attention to it's progress in value-added, games, e-commerce, and advertising businesses.

2). The 2nd-ranked $Tencent Music(TME)$ is not only a music company, but more like a technology company. The Q322 financial report shows that TME is still investing in product and technology research and development. which means TME is exploring the value triangle of technology, music content, and user experience through the reserve of technological strength. TME's total revenue was RMB 7.37 billion, an increase of 6.7% from the previous quarter. The company's non-IFRS net profit was RMB 1.41 billion, an increase year-on-year and month-on-month.

3). The 3rd-ranked e-commerce company $Vipshop(VIPS)$ has been making money secretly. It provides convenient and high-quality products and logistics after-sales support in China. In the Q322, the company achieved revenue of RMB 21.615 billion and a net profit of RMB 1.687 billionattributable to shareholders of the company. A year-on-year increase of 168.4%, higher than Bloomberg's consensus estimate. Although the income of the epidemic is under pressure, the cost control has achieved remarkable results, and the profit side has steadily increased.

4). $Kanzhun Limited(BZ)$ , a corporate recruitment service company, it’s revenue in last quarter was RMB 1.211 billion, a YoY increase of 105%. The company’s revenue growth rate exceeded market expectations, and it is increasing investment in human resources technology. BZ's gross profit margin has exceeded 85% for 10 consecutive quarters.

5). The logistics company $FULL TRUCK ALLIANC SPON ADS EACH REP 20 ORD SHS CL A(YMM)$ has risen by 54.7% in the past two months. Based on the recent favorable macro-level and the reopening, the cross-city freight flow will enter an upward recovery period, and the company will usher in a marginal improvement in fundamentals. CICC expects that in 4Q22, the company's revenue will increase by 27% YoY and the non-general standard net profit will increase by 41% YoY.

6). $ZTO Express Inc.(ZTO)$ 's Q322 performance increased by more than 60% YoY, and adjusted net profit , a YoY increase of 63%, exceeding expectations. In Q3, ZTO’s express volume increased by 11.7% YoY, 6.5% ahead of the industry, and its market share reached 22.1%, a YoY increase of 1.3%. It is expected that Q422 earnings may be better than market expectations.

7). $XPeng Inc.(XPEV)$ increased by 43.64% in November-December. It’s latest December delivery volume fell 29% YoY, but increased by 94% MoM to 11,292 vehicles, bringing its delivery volume in the fourth quarter of 2022 to 22,204 vehicles, slightly higher than the company’s 20,000 -21,000 expected. The total delivery volume in 2022 will reach 120,700 units, a YoY increase of 23%. XPEV announced that it will re-subsidize all new energy vehicle purchase subsidies that expired on December 31, 2022 (RMB 10,000-13,800 per vehicle), and maintain the MSRP of the current model lineup until 2023 remains unchanged. In addition, the new P7 is expected to be unveiled after the Chinese New Year, which will be the next catalyst for the company's share price. MS maintains an "overweight" rating with a target price of $12.

8). $Baidu(BIDU)$, On December 30, Baidu "Carrot Run" was among the first to be approved to carry out fully unmanned autonomous driving tests in Beijing. In 2023, Baidu Apollo will continue to expand its business scale, and plans to gradually increase the deployment of 200 fully unmanned operating vehicles across the country, striving to build the world's largest unmanned operating service area.

9). The hotel group $H World Group(HTHT)$ 's revenue in 3Q22 was RMB 4.1 billion, a YoY increase of 16.2%, in line with the previous revenue guidance. It is believed that 2023, when the epidemic control is relaxed throughout China, will usher in a performance improvement.

10). $JD.com(JD)$ was up 38.7% in the last two months, JD's revenue in the Q322 increased by 11.4% YoY(Tencent +1.6%, Ali +3%), but its non-GAAP net profit exceeded RMB 10 billion, a record-breaking increase of 99% YoY (Tencent +1.58%, Ali + 18.6%). It is believed that with the restart of the economy, consumption will continue to increase steadily.

3.China Investing Outlooks

Kondo, who manages Bronze-rated Schroder China Asset Income fund and Neutral-rated Asian Asset Income funds:

"If we are thinking about the global economy going through a recessionary-phase, some export-oriented economies could be suffer from a lower demand, while China, coming out from the cyclical normalization, is likely to present interesting opportunities."

US Public Company Accounting Oversight Board Chair Erica Williams says,

"investors are better protected after the PCAOB’s audits of about 200 companies based in China and Hong Kong. PCAOB inspectors have been able to sufficiently review audit documents and the determination diminishes the chances that companies including Alibaba and JD.com will be delisted in New York."

Sean Taylor, Asia-Pacific chief investment officer at asset manager DWS said,

"It's now getting risky to be really underweight or short China as many of the hedge funds were, there is scope for a 15-20% rally in China next year."

Arvind Sanger, Managing Partner, Geosphere Capital:

"China is probably one of the cheapest emerging markets in the world and has a strong potential for a strong rebound."

Chi Lo, senior strategist at BNP Paribas Asset Management said:

"Monetary easing has become ineffective, just like pushing a string, We continue to focus on the three key themes which are in line with China’s long-term growth target: technology and innovation, consumption upgrading and industry consolidation."

4. Will the sharp drop in Chinese stocks come agian?

Can ADRs reproduce the stunishing past?

From a macro point of view, with China's domestic policy shifting, the rectification of the platform economy is relatively friendly; Sino-US regulatory negotiations have made significant progress; the Fed's interest rate hike or expected external factors have improved.

In the past 2 years, the main factors affecting the sharp decline of Chinese ADRs have been greatly improved so far. Looking back, there is no need to be too pessimistic about Chinese stocks, but if you want to replicate the big bull market of the previous few years, It is estimated that the overall is also difficult. the reasons are:

Firstly, the fastest-growing bonus period of the platform economy may have passed, the overall scale is already large, the penetration rate is already high, and the growth rate has slowed down. Unless there are some new explosive models appear, or it may come out of the big bull market.

Secondly, the big bull market of Chinese stocks in the past few years happened to be the big bull market of the US currency, especially the big bull market of the $NASDAQ(.IXIC)$ index. Looking back, starting from the end of 2023, the U.S. economy may fall into recession, and there is uncertainty about whether U.S. stocks will be able to take a big bull market.

Thirdly, judging from the regulatory policies of various countries in the world, anti-monopoly has not receded. At present, China supports the development of platform economy, but it does not mean that it will support monopoly, nor does it mean that it will not anti-monopoly.

Final questions for you:

Which Chinese stock with good fundmentals that you really care?

Please share with Tigers