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JPMorgan raises its view on Alibaba, Tencent and Meituan in China

JPMorgan raises its view on Alibaba, Tencent and Meituan in China

This photo taken on September 25, 2020, shows Jack Ma, founder of Alibaba Group, attending the opening ceremony of the third All-China Young Entrepreneur Summit in Fuzhou, Fujian Province, China. Alibaba is among the Chinese technology stocks that have been promoted recently by JPMorgan analysts.

Liu Ming | China News Service via Getty Images

JPMorgan upgraded Chinese tech stocks on the back of diminishing risks, just two months later He described the sector as “uninvestable”.

US investment analysts have upgraded the stock ratings of seven Chinese internet companies, including TencentAnd Ali BabaAnd MituanAnd Netease And Bindudu From “underweight” to “overweight”. He notes that they believe these stocks could outperform the average total return of stocks in the analyst’s coverage range over the next six to twelve months.

In a note published on Monday, China internet analyst Alex Yao and his team said that “significant uncertainties should start to subside on the back of recent regulatory announcements” that came earlier than expected.

The bank said digital entertainment, local services and e-commerce stocks would be the “first batch of outperformers”.

“We believe the major risks to the sector have diminished, particularly in terms of regulatory risks, ADR write-off risks, and geopolitical risks,” said JPMorgan analysts.

Read more about China from CNBC Pro

Back in March, Yao and his team said they considered the sector “uninvestable” for the next six to twelve months, a call The subsequent Bloomberg report was published in error. JPMorgan’s Yao did not immediately respond to CNBC’s request for comment on the allegations in the Bloomberg report.

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Even before the bank’s March call, Chinese internet stocks were already taking a hit — battered by months of regulatory uncertainty and concerns about supply chain disruptions from the mainland’s strict non-spreading coronavirus policy.

The Hang Seng Tech index, which tracks Hong Kong’s largest listed tech stock, is down more than 27% this year, as of Monday’s close.

Concerns about a higher interest rate environment as major central banks look to tame hyperinflation have also been a major drag on the broader technology sector globally. Higher rates tend to make future earnings for growth firms appear less attractive.

heavy technology Nasdaq Composite On Wall Street it is down more than 25% until Monday’s close.