Companies operating in China have been some of the hardest hit by recent macroeconomic headwinds. These Chinese stocks continue to remain well off their peaks, although a recovery is starting to clearly form in recent trading sessions.
Shares of Alibaba (NYSE:BABA), PDD (NASDAQ:PDD), Baidu (NASDAQ:BIDU) and JD.com (NASDAQ:JD) stocks are all up between 7% and 12% in early afternoon trading. These outsized moves suggest big money is flowing in fast.
There are a range of reasons for this rally, from a fear of missing out move to bullish sentiment around Chinese property market stimulus as a way to stabilize the overall economy.
Chinese Stocks Surge as Investors Pile In
Some interesting survey data put forward by the China Council for the Promotion of International Trade this week suggests international money managers are growing increasingly bullish on the Chinese stock market. A greater proportion of investors believe the Chinese market is a good place to invest over the next five years, with a majority of respondents saying that the Chinese stock market may be more appealing than domestic markets.
That is a very rapid shift from the sentiment levels we saw just a year ago. A tech sector crackdown, driven by very hawkish policy from Chinese regulators, suggested that there is indeed a cap on how big companies can get. For large-cap names like the big movers today, that is not a great thing.
However, a shift in policy toward more accommodative fiscal stimulus, and perhaps a realization that equity markets matter, appears to be shifting this view. If Chinese regulators take their foot off the break, there is plenty of growth ahead that can be had by these four names in particular.
There are also trillions of dollars of capital in the U.S. waiting to be deployed, much of which is sitting in money market accounts earning a juicy yield. If rates drop, and this capital needs to be put to work, the Chinese market is starting to look like a solid relative value bet.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
