U.S.-listed Chinese companies like Alibaba (BABA), Baidu (BIDU), and JD.com (JD) surged by 10%, 9.1%, and 14.4%, respectively, on Thursday. This came after China’s tech stocks experienced their best week since 2008, following the central bank’s announcement of a massive economic stimulus package aimed at boosting the domestic economy.
Importantly, China’s CSI 300 index, which tracks blue-chip stocks in the Shanghai Composite and Shenzhen Composite indices, jumped 15.7% over the week. Moreover, Hong Kong’s Hang Seng index climbed 13% during the same period.
Stimulus Package Addresses Key Concerns
It is worth highlighting that the stimulus package supports China’s struggling property market, provides financial aid to residents, and expands social security benefits for unemployed graduates. These measures directly addressed concerns about the debt-laden property market and high youth unemployment, leading to increased confidence in consumer spending and internet companies.
Another major factor that helped boost investor confidence is an RMB800 billion ($114 billion) lending pool designated for China’s capital markets. These funds will facilitate company share buybacks and encourage non-bank financial institutions to invest in local equities. Furthermore, the central bank reduced the reserve requirement ratio for banks and lowered mortgage interest rates, all in a bid to revive the Chinese economy.
While Chinese tech stocks have witnessed a significant rally, they still remain significantly below their 2021 all-time highs. The long-term performance of these stocks will largely depend on how effective China’s stimulus measures prove to be, as well as broader factors affecting the global economy.
What Is the Best Chinese Stock to Buy Right Now?
All the above-mentioned three Chinese tech stocks have a Strong Buy consensus rating. Among these stocks, Baidu stock has the highest upside potential of 25%, while Alibaba has the “Perfect 10” Smart Score, which indicates its potential to beat market averages.
