(Bloomberg) — Chinese tech stocks listed in the US got a fresh dose of good news Thursday morning, after Alibaba Group Holding Ltd. reported a better-than-expected revenue haul for the first quarter despite China’s ongoing economic woes.
Alibaba’s strong report helped drive a rally in its tech peers on Thursday, with JD.com Inc. and Pinduoduo Inc. gaining over 6% and Baidu Inc. higher 2.5%. Shares of the e-commerce giant surged as much as 7.6% in its biggest climb since June and rose on a fourth consecutive day. The Nasdaq Golden Dragon Index advanced 2.5%.
“The company mentioned the business recovery in June which should help other ecommerce players like JD.com and Pinduoduo,” said Henry Guo, an analyst at M Science LLC. “Investors had low expectations on China ADRs before this print but Alibaba reports suggests likely business upsides to expectations for those companies.”
Chinese tech stocks have been through a tumultuous ride for more than a year amid regulatory crackdowns and a series of bruising lockdowns that dampened consumption, and more recently, rising geopolitical tensions. Some analysts have been optimistic about earnings results, with others holding on to their bullish calls on the nation’s stocks. Traders have also been offloading the stocks, with the Nasdaq Golden Dragon China Index down about 17% this year after an 11% decline in July. Still, the benchmark has climbed 38% from a March low.
Now, Alibaba’s sales beat may be a welcome sign for investors even as the stock continues to face a litany of other headwinds, including a struggling Chinese economy and regulatory concerns from authorities in both Beijing and Washington. Last week, the company was added to the US Securities and Exchange Commission’s list of stocks that are at risk of being delisted from American exchanges. That came just days after Alibaba said it would be seeking a primary listing in Hong Kong.
“It is an encouraging start to the earnings season for China tech,” said Bloomberg Intelligence analyst Marvin Chen. “Investors will be looking for guidance that the worst is behind us, and for tech that means from an economic and regulatory perspective.”
All eyes will be on quarterly results due from other Chinese tech giants like Baidu, JD.com and Pinduoduo, which are expected to release their numbers later this month. Baidu’s shares have dropped about 5.1% this year, while JD.com and Pinduoduo fell more than 6% each.
(Updates share moves at open and adds analyst comment)
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