Chinese tech stocks rebound on strong earnings — Pinduoduo takes lead

Chinese stocks saw their best day in weeks as Chinese e-commerce giants, Pinduoduo, JD and Tencent, reported earnings that showed massive growth and little impact from regulations.

What’s the big deal? By now, you’re probably aware of the Chinese crackdown on the tech industry — which sent the Invesco Golden Dragon China ETF (NASDAQ:PGJ) down 50% since Feb. But markets change fast, as do investor opinions.

Pinduoduo (NASDAQ:PDD) — one of the fastest-growing Chinese e-commerce companies — jumped 22% after reporting earnings:

• Reached profitability for the first time in its history.
• Sales grew 89% — less than expected.

PDD popularized group-buying — giving discounts to consumers for volume purchases — as China’s rural regions are difficult to access.

Peace offering: PDD is trying to get on China’s good side — by agreeing to donate its future earnings for agricultural development until it’s given away $1.5b USD.

• PDD’s stock surged over 460% between Mar 2020 and Feb 2021 but then dived 50% since China’s regulations.
• Like many Chinese stocks, PDD is fairly cheap at its current price relative to growth but the risks — a.k.a. China — are still there.

PDD holds a lot of consumer data and has a small mobile gaming division — two areas of criticism from the Chinese government.

Is the coast clear to invest? Depends on the industry. There’s no sign that regulations are over but investors are already looking for bargains.

These strong earnings were enough to change one investor’s mind. Cathie Wood, who sold most of her Chinese stocks in ARK Invest, picked up shares of JD yesterday.