The timing of the JPMorgan market for calls in China is difficult

(Bloomberg) — Chinese tech stock returns are harder than ever to predict in an era of shifting government policy, rising interest rates, and cooling economies.

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Take Alex Yao of JPMorgan Chase & Co.. It downgraded 28 online Chinese stocks in March, calling the industry “uninvestable” — before a big rally. He then moved on to upgrading the sector in mid-May, and while indexes have risen since then, Tencent Holdings Ltd has fallen. By about 20%. Alibaba Group Holding Ltd. She is a broad haired, far from wiping out all the gains since Yao upgraded the stock.

An investor who follows Yao’s recommendations on Tencent has lost 48% over the past year, the worst among analysts who follow the stock, according to data compiled by Bloomberg. With that said, Yao has a lot of companies. Many analysts’ strategies on stocks could have resulted in losses of more than 30%. Yao and JP Morgan did not respond to requests for comment.

“We feel it will be very difficult to determine when is the right time to move to China,” said Tom Massey, New York portfolio manager at GW&K Investment Management. “What we are seeing now are the fallout from the slowdown caused by the Covid shutdown, increased uncertainty about the property market, and increased pressure from unemployment.”

Chinese internet stocks have seen wild fluctuations even by the standards of the volatile tech sector.

The Nasdaq Gold Dragon China’s index of US-listed companies lost three-quarters of its value from its February 2021 peak to its lowest level in March this year, after it was crushed by a government regulatory crackdown. Then, China’s sweeping promise that the worst of the screening was passed, led to a nearly 60% jump in the benchmark. But that rally faded in late June due to growing concern that companies would be delisted from US stock exchanges and profits would be squeezed by the economic slowdown.

Tencent slumped on Tuesday to its lowest level since 2018 after it failed to obtain licenses for new online games.

People familiar with the matter said in May that Yao’s famous March call should not use the word “uninvestable.” JPMorgan staff responsible for examining the bank’s research asked that it be removed from the 28 reports that Yao and his team drafted before they were published, the people said, but it backed out on four of them due to an editorial error.

For now, the majority of analysts are still holding onto their bullish trend. Tencent has the most buying recommendations of any Asian company, while Alibaba and delivery giant Meituan are also near the top of the list, according to data compiled by Bloomberg. Analysts expect the three stocks to rise at least 38% in the next 12 months. Alibaba shares rose 2.5 percent in New York on Tuesday.

August earnings season will provide a real test. Analysts expect a weak quarter for Chinese tech companies, as the April-June period was halted by the country’s shutdown of major cities. Alibaba is expected to report its first quarterly revenue decline this week.

“Confidence must grow in the state’s willingness to allow these companies to thrive,” said David Waddell, CEO and chief investment strategist at Waddell & Associates. “Confidence must increase that Chinese lockdowns will abate. Confidence must increase that recessions in the developed world will not engulf the developing world.”

Technical chart for today

Tech companies have cut more than 60,000 jobs this year, according to Layoffs.fyi, which closely tracks publicly traded and owned companies. On Monday, Oracle Corp. laid off employees in its marketing and customer experience division in the United States, although the extent of the cuts could not be immediately determined. “Management is taking a proactive approach” as economic headwinds hit the software giant, said Barclays Plc analyst Raimo Lincho. The stock is down 11% this year, compared to the Nasdaq’s 21% decline.

The most important technical stories

  • Uber Technologies Inc reported revenue that beat analyst estimates, buoyed by resilient demand from customers who continued to welcome rides and order takeaway food despite rising inflation. Shares jumped as much as 16% on Tuesday.

  • Oracle cut jobs in the marketing and customer experience division in the United States, indicating a decline in customer analytics and advertising services.

  • Pinterest Inc. has jumped. After reporting flexible sales and user numbers, Elliott Investment Management confirmed a major stake, saying it had agreed to lead the company. Shares rose about 18% on Tuesday.

  • Activision Blizzard Inc. , the largest video game publisher in the United States, reported revenue that beat analyst estimates, but adjusted sales were down 15% from a year ago due to the soft launch of Call of Duty last fall and a slow year in the games industry overall.

  • As the US Congress passed a historic $52 billion federal program to boost the capabilities of the domestic chip industry, it included one important caveat: Companies receiving funding must pledge not to increase their production of advanced chips in China.

  • Hedge fund billionaire Steve Cohen has exited his investment in cryptocurrency startup Radkl, according to a spokesperson for the digital asset firm.

  • A weak yen has driven up prices for electronic devices from iPhones to refrigerators across Japan this year, with one glaring exception: the video game console.

  • Amazon.com has hired a top congressional Republican aide, stepping up its efforts to thwart a new antitrust bill targeting US technology companies, according to two people familiar with the appointment.

  • The US regulator is throwing cold water on a workaround that has been put forward as a way to avoid delisting nearly 200 Chinese companies from US stock exchanges.

  • Apple Inc. The US high-quality bond market on Monday with $5.5 billion selling in four parts.

  • Skyports Ltd. Ltd., which builds take-off and landing sites for flying taxis, is an investment from Singapore Technologies Engineering Ltd. Amid plans to set up a station in the city for airborne electric taxis.

(Adds Alibaba’s stock move in the ninth paragraph.)

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