Last month, dismal economic data, government interventions against selling equities, and regulatory concerns sank China stocks. According to S&P Global Market Intelligence, JD.com, PDD Holdings, and Baidu lost 22%, 13.3%, and 11.6%, respectively, this month. The iShares MSCI China ETF (NASDAQ: MCHI) plummeted 10.3% last month, indicating China stock weakness.
Chinese equities started the month poorly as China reported 5.2% GDP growth for 2023. That would be fantastic for any economy, but China's GDP growth slumped to 4.1% in the fourth quarter and its worst annual growth in 30 years. It should maintain that pace in 2024.
Investors were also alarmed that Beijing advised certain investors not to sell Chinese shares amid a money management movement from China to Japan. Later that month, a court liquidated China Evergrande Group, previously the country's largest real estate developer. That was the latest indicator of Chinese real estate decline.
Those news pieces pushed China equities, while JD, PDD, and Baidu struggled. Despite no company-specific news, JD.com was the poorest performer in the last three months. As the firm grew slowly in 2023, JD shares sank dramatically. It has lost market share to PDD Holdings' Pinduoduo, which has grown significantly through its social commerce concept of group discounts.
In December, founder Richard Liu advised JD.com to be more competitive and acknowledged its size and inefficiency. Alibaba founder Jack Ma made similar calls to action. PDD Holdings, however, avoided China's overall slump throughout the first part of January but fell at the end.
That weakening appeared to connect to analyst concerns that its Temu e-commerce app's worldwide expansion may be waning. Temu drove PDD's third-quarter revenue up 94%, but since it's hard for any store to double sales each quarter, especially one approaching $40 billion in revenue, that growth is expected to slow
Finally, Baidu's shares plummeted in the middle of the month when a story linked their Ernie AI platform to military research, which might prompt a response from the U.S. government, which has tightened chip export limits to China.
Baidu, China's search leader, refuted the allegation, but the price didn't rebound. China's IT sector is unlikely to rebound. Apple revealed a sales drop in China, highlighting the dismal economy. Due to its quick expansion, PDD has done well, although the economy looks bad. Give its quick development, PDD appears like the best Chinese stock today. Baidu's AI chatbot is impressive, but China's economic depression may linger, so investors should be careful.
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