Baidu shares jump 39% as China stocks soar in U.S.

Posted: 16 March 2022 6:06 pm
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Struggling shares of several Chinese companies posted big gains on a report suggesting regulatory issues with the SEC and with China’s government may soon be resolved.

Stocks of Chinese tech companies lead the US market higher today, with (JD) and Baidu (BIDU) up 39%
Those and many other China-based stocks and ADRs had been in a tailspin for months as they faced pressure from US and China, with the most recent drop credited to a warning from the SEC last week that some might be delisted over audit concerns.
The official Xinhua News Agency reported overnight that China promised it would move to stabilize markets and work out regulatory conflicts with the US. The Hong Kong market rallied 9%, and investors lifted many of the biggest names trading in the US.
Is it safe to go back into these names? Based on their past highs they have the potential to move even farther, but their future hinges on how these issues are ultimately resolved.

On the move

These names were all up big today, but remain down significantly over the past 12 months:

  • NetEase (NTES) — up 26% today but still down 14% for the year.
  • Alibaba (BABA) — up 36% today, down but still off 55% for the year.
  • (JD) — up 40% for the day but down 25% over a year.
  • Baidu (BIDU) — up 39% today but still down 45% over a year.
  • Tencent (TCEHY) — traded over the counter in the US, up 33% for the day, is still down 35% for 12 months.

Outlook “unpredictable”

Keep in mind, though, stocks don’t necessarily move up to past highs. And there’s a lot of uncertainty over these.
Just yesterday a J.P. Morgan analyst dropped the outlook on Alibaba and Baidu from overweight in a note covered by “China Internet [stocks look] unattractive on a six- to 12-month view with an unpredictable share price outlook, depending on the market perception of China’s geopolitical risks, macro recovery and Internet regulation risk,” the note reportedly reads.

Among the issues outstanding: US regulators want better access for auditing to keep companies listed, and China has pushed for more Hong Kong listings and regulation over a variety of industries.
The report from China suggests much of this could be resolved. But investors should keep in mind that nothing has been resolved yet.

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