China stocks took a nosedive last month as a perfect storm of weak economic data, Chinese government intervention against stock sales, and lingering regulatory concerns battered the sector across the board.
Notably affected were JD.com (NASDAQ: JD), PDD Holdings (NASDAQ: PDD), and Baidu (NASDAQ: BIDU), which all saw their stock prices plummet by 22%, 13.3%, and 11.6% respectively, as reported by S&P Global Market Intelligence. The iShares MSCI China ETF (NASDAQ: MCHI) tanked by 10.3%, reflecting a broad downturn in China stocks.
Here’s how each stock fared last month.
The Struggle of China Stocks Continues
Chinese stocks stumbled right out of the gate when China reported a tepid GDP growth of 5.2% for 2023. Although average for most nations, it marked China’s slowest annual growth in 30 years, with GDP growth slumping to a mere 4.1% in the fourth quarter – a trend expected to persist through 2024.
Investors were also rattled when Beijing discouraged stock sales, amidst money managers shifting from China to Japan. Later, a court ordered the liquidation of China Evergrande Group, once the nation’s largest real estate developer, signaling further weakness in the Chinese real estate sector.
These developments exacerbated the pressure on China stocks, while JD, PDD, and Baidu grappled with their own challenges.
Despite minimal company-specific news on JD.com, the stock tanked over the past few months as flat growth plagued the company throughout 2023. Losing ground to PDD Holdings’ Pinduoduo, JD.com suffered from eroding market share. Founder Richard Liu had urged the company to be more competitive, echoing a similar plea from Alibaba founder Jack Ma in December.
PDD Holdings, initially resilient to China’s broader weakness, faltered towards the end of January. Analyst comments suggested that the boom from its Temu e-commerce app in international markets might be plateauing. The success of Temu had spurred a 94% revenue surge in the third quarter, but with a run rate of $40 billion in revenue, such astronomical growth was unsustainable.
Finally, Baidu’s stock sagged mid-month following an article linking its Ernie AI platform to military research, potentially provoking a U.S. government response, given its preexisting restrictions on chip exports to China. Despite Baidu’s denial, the stock struggled to bounce back.
Image source: Getty Images.
Prospects for a China Stock Rebound
Currently, little suggests a revival in the China tech sector. Apple‘s report of a sales decline in China further corroborates the region’s economic frailty. While PDD exhibits strong growth, the overall economic landscape in China appears challenging.
For prospective Chinese stocks, PDD seems the most appealing, given its rapid growth. Baidu’s AI chatbot also holds promise, yet investors may want to tread cautiously, given China’s ongoing economic struggle.
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Jeremy Bowman holds positions in JD.com. The Motley Fool holds positions in and recommends Apple, Baidu, and JD.com. The Motley Fool recommends Alibaba Group. For a full disclosure policy, click here.
