JPMorgan Upgrades Views on China’s Alibaba, Tencent and Meituan

This September 25, 2020 photo shows Jack Ma, founder of Alibaba Group, attending the opening ceremony of the 3rd All China Young Entrepreneurs Summit in Fuzhou, Fujian Province, China Country. Alibaba is among the Chinese tech stocks recently upgraded by JPMorgan analysts.

Lyu Ming | China News Service via Getty Images

JPMorgan upgraded China’s tech shares as risks eased, just two months later called the sector “uninvestable”.

Analysts at US investment have upgraded their ratings for shares of seven Chinese internet companies including Tencent, Alibaba, Meituan, NetEase and Pinduoduo from “underweight” to “overweight”. It indicates that they believe these stocks could outperform the average total returns of stocks in analyst coverage over the next six to 12 months.

In a note published Monday, bank China Internet analyst Alex Yao and a team said “significant uncertainties will begin to ease thanks to recent regulatory announcements” being made. sooner than expected.

The bank said digital entertainment, local services and e-commerce stocks would be “a better first batch”.

“We think the key risks to the sector have eased, particularly in terms of regulatory risk, ADR delisting risk and geopolitical risk,” said JPMorgan analysts. “.

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Back in March, Yao and a team said they considered the sector “uninvestable” for the next six to 12 months, a term The Bloomberg report was later published by mistake. JPMorgan’s Yao did not immediately respond to CNBC’s request for comment on the statements made in the Bloomberg report.

Even before the bank’s call in March, China’s internet stocks had been hit by months of regulatory uncertainty and worries about supply chain disruptions from China’s strict zero-Covid policy. continent.

The Hang Seng Tech Index, which tracks Hong Kong’s largest listed technology stocks, is down more than 27% this year through the end of Monday.

Concerns about a higher interest rate environment as major central banks seek to rein in hot inflation are also a big part of the broader tech sector globally. Rising rates tend to make the future earnings of growth companies look less attractive.

Heavy technology Nasdaq Composite on Wall Street was down more than 25%, as of Monday’s close.

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