Why Alibaba, JD.com, Tencent Music Entertainment Group’s Shares Are All Rising Today

what happened

Several Chinese stocks traded on U.S. exchanges rallied for no apparent reason, although some bullish sentiment on Wall Street and recent macro news from China appeared to be driving the move.

Shares of China’s Largest E-Commerce Companies Alibaba Group Holding (Baba 3.01%) As of 2:22 p.m. ET today, prices are trading up more than 3% today. The stock of another large Chinese e-commerce company, JD.com (JD.com 3.80%)Trading up more than 4%, shares Tencent Music Entertainment Group (TME 7.95%) Trading prices rose more than 8.4%.

so what

Chinese stocks struggled with Hong Kong stocks last week Hang Seng Index It is down about 3.6% in the past five days of trading as China’s economy continues to show signs of slowing throughout the year following the COVID-19-induced lockdown.

Image credit: Getty Images.

On Monday, China’s central bank continued to cut key interest rates to boost the economy. The People’s Bank of China lowered the prime rate for five-year loans to 4.3% from 4.45% and cut the prime rate for one-year loans to 3.65% from 3.7%.

A week before Monday, the central bank cut short-term bank lending rates to 2% from 2.1% and one-year lending rates to 2.75% from 2.85%. The move came after China’s July retail sales data and industrial production data came in worse than expected.

Lower interest rates tend to favor high-growth tech stocks because they can improve profitability and reduce operating costs. Investors also tend to become more aggressive when rates are cut. But rate hikes may take some time to kick in, no matter which direction they go.

In other news, JD.com got some positive sentiment from Wall Street today. First, The Benchmark Company analyst Fawne Jiang raised his price target on JD.com to $109 from $106.Then Citigroup Analyst Alicia Yap maintained the company’s buy rating on the company, even though analysts cut their price target on the stock to $91 from $93 a share. JD.com is currently trading below $60 per share.

Yap said she believes once the pandemic in China is completely over, the e-commerce giant will start increasing revenue and users faster. The bullish call came a day after JD.com reported earnings and revenue for the second quarter of this year that easily topped analyst expectations.

How to do

China’s economy has clearly underperformed this year, as intensive COVID-19-related lockdowns have really dented growth.may take some time China concept stocks Recovery, especially in the presence of other global macro issues.

But the Chinese government appears to be more supportive of the country’s big tech companies in general, which is important because if Chinese regulators don’t work with certain companies, they can make life very difficult.

Shares in Alibaba, JD.com and Tencent Music have sold off sharply over the past year, so there’s certainly room for upside if economic conditions improve. I think JD.com and Alibaba are two well-positioned long-term buys in the industry.