Alibaba, Tencent drive relief rally in China tech stocks as strong report cards calm nerves on earnings outlook

  • Alibaba and Baidu’s earnings reports offer some relief to investors worried about pandemic-hit earnings in China’s stop-start economy
  • Chinese firms generated 2 per cent growth in March quarter earnings, according to Goldman Sachs, trailing the 9 per cent forecast for MSCI China members

Chinese tech stocks soared, following the biggest jump in at least four weeks in Alibaba Group Holding and Baidu, after their latest results topped estimates, easing concerns about the outlook for pandemic-hit corporate earnings.

The Hang Seng Tech Index rallied 3.7 per cent as of noon trading break, its biggest gain in a week. The advance fuelled the main Hang Seng Index to a 2.8 per cent gain, while the benchmark index in Shanghai rose 0.5 per cent. Today’s rally trimmed index losses in Hong Kong for the week.

Alibaba, the owner of this newspaper, surged 12.5 per cent to HK$93.10 for its biggest gain since April 29. Its fiscal fourth-quarter revenue grew 8.9 per cent to 204.05 billion yuan (US$30.3 billion), beating consensus estimates for a 7 per cent gain.

Baidu rose 15.1 per cent to HK$133.20. The search engine operator’s revenue rose 1 per cent to 28.4 billion yuan in the quarter to March 31, just ahead of the market prediction of a 0.8 per cent gain.

“Chinese tech stocks are exploring the ground floor until the growth story gets clearer,” said Wang Shenshen, a China equity strategist at Mizuho Securities. “Measures to help the Chinese economy are likely to provide some support for the tech stocks as well.”

Both sets of results came as a relief to investors who have been worried about corporate earnings as China‘s zero-Covid policy leaves the economy in a stop-start fashion, upsetting production activity and clouding earnings outlook. More than US$400 billion of market value has been erased from Hang Seng Tech Index members this year as the gauge slumped 26 per cent this year, according to Bloomberg data.

About 86 per cent of all Chinese onshore and offshore firms have reported their earnings for the March quarter through May 20, according to Goldman Sachs. Earnings rose an average of 2 per cent, versus consensus estimates per cent for MSCI China Index, the US bank said.

All but five of the 66 Hang Seng Index members rose on Friday. WuXi Biologics jumped 7.6 per cent to HK$54.50, while appreciated 5 per cent to HK$207.20. Tencent added 2.3 per cent, while Meituan and NetEase strengthened 3.5 per cent.

Energy producers also advanced as oil prices climbed for a fifth week to about US$115 a barrel amid signs of tight supply. CNOOC added 4.5 per cent to a two-year high of HK$12.18. PetroChina rose 2.5 per cent and Sinopec gained 1.2 per cent.

CloudWalk Technology, known as one of China’s four “dragons” in the artificial intelligence sector, kicked off its trading debut on Friday. It soared 33 per cent to 20.41 yuan in Shanghai. Shenzhen CHK, which manufactures household appliances control products, slipped 11 per cent to 13.59 yuan in Beijing.

Author: Cheryl Heng, SCMP

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