China ADRs: Why Chinese stocks Alibaba, Baidu and Li Auto jumped this year?

Most Chinese companies listed in the US have recorded double digit gains so far this year, however, they have largely underperformed their US technology peers when it comes to their stock performance. 

For instance, as of data up to June 16, 2023, big tech companies in the US like Meta, Nvidia and Tesla have soared above 100%, while Google and Microsoft recorded strong double digit gains. 

In the meantime, big Chinese tech firms like Alibaba, Baidu, Pinduoduo and JD.com have not performed so well. Alibaba recorded YTD returns of 5%, while JD.com and Pinduoduo lost about 30% and 2% respectively. 

To provide added perspective, China’s benchmark stock index, the Hang Seng (HSI) is flat so far this year, while the Nasdaq 100 has risen around 40%.

China’s economic slowdown weighing on Chinese tech shares? 

The Chinese economy has been witnessing a slowdown period as shown by the recent economic data. However, the slowdown has come as a surprise as China’s economy grew at a faster pace than anticipated during the first three months of this year. 

However, in April and May, the economy's performance slowed down, failing to meet expectations. 

Various economic indicators such as retail sales, vehicle sales, property prices and property registrations all showed the economy was in somewhat of a lull. The poor data pushed investors having a larger exposure towards China to cut down their investments towards the Asian country.  

Chinese stocks: People Bank of China’s surprise rate cut helping China shares?

China’s central bank recently cut its seven day reverse repurchase rate - the rate at which a bank can park excess reserves with the central bank. In this case, when the repurchase rates drop, banks by default would release their excess reserves in the market, helping boost economic activity. 

In an effort to stimulate growth in the second largest economy worldwide, the People's Bank of China recently implemented two reductions in key lending rates, marking the first such action in 10 months.  

The central bank of China decreased the one-year loan prime rate by 10 basis points, adjusting it from 3.65% to 3.55%, while also lowering the five-year loan prime rate by 10 basis points, bringing it down from 4.3% to 4.2%. This reduction in rates was the first occurrence since August. 

This decision was largely anticipated due to a series of underwhelming economic indicators in recent weeks, including industrial production, fixed asset investment, retail sales, and trade figures for May. China is now facing the risk of deflation as initial optimism surrounding reopening starts to fade away. 

Top Chinese shares listed in US: Year to date performance 

(Data as on June 16, 2023)

This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.