Today, China stocks soared as all three of the major stocks in the country reported better-than-expected earnings. Alibaba Group Holding Ltd. (BABA), Kanzhun International and Full Truck Alliance have all enjoyed gains on their respective stock markets and are now among the few companies that are ending with a profit despite today’s bearish market outlook overall.
- Alibaba Co. was up over 10% today as investors reacted to strong fourth-quarter earnings; the company recorded some $50 billion in sales for its fiscal 2020 year and boasted a net profit of $23 billion.
- Kanzhun International rose over 4% after recording amazing third-quarter revenues that came in at more than 120 million dollars, with a net gain of 12 million dollars for the quarter ending April 30th.
- Full Truck Alliance gained a hefty 8% today as it experienced 77% revenue growth in its first quarter this year – totaling 15 million yuan (approximately $2 million US dollars) – along with profits of 3 million dollars for the same quarter ending June 30th.
These runarounds have been attributed to the booming mobile application usage by Chinese consumers, due largely to having one of the world’s largest internet populations. Companies such as these are seeing increasing demand from their customer base not only domestically but also internationally as travel restrictions ease and global investors continue to flock to China’s stock markets throughout 2020. These strong financial results confirm success stories like these can continue even through uncertain times of global economic slowdown due to events such as U.S.- China trade wars, COVID-19 pandemics, etc., making them very attractive investment opportunities indeed!
Overview of Chinese Stock Market
The Chinese Stock Market has been booming in recent months, with stocks from Alibaba, Kanzhun, and Full Truck Alliance all seeing substantial gains today. This is the result of strong earnings reports released by each company, indicating that investors are bullish about their future prospects.
In this article, we will be looking at the overview of the Chinese stock market and the reasons why these stocks are surging today.
Background on Chinese Stock Market
China’s stock market is one of the largest and most influential in the world. It consists of two separate exchanges that are headquartered in Shanghai; the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE). Both exchanges offer both A-shares and B-shares, with A-shares open only to domestic investors, while B-shares are open to both domestic and international investors.
The Chinese equity markets have experienced considerable growth over the past decade, but also occasional bouts of high volatility. As a result, there have been measures taken in recent years to further develop and regulate the market. Specifically, in February 2018 a strategic framework was published which details methods to provide stability in China’s financial markets by promoting fair pricing mechanisms, strengthening risk management systems, improving corporate governance standards and deepening financial literacy among investors.
In order for international investors to gain access to China’s equity markets they must register with a broker that has gained approval from either Exchange. As one of these registered brokers, some of our clients can place orders on A-shares through our Qualified Foreign Institutional Investor (QFII) program or via buy plans created by other registered parties.
Recent Performance of Chinese Stock Market
The Chinese stock market has recently been on a steadily rising trajectory. This has been driven by a combination of factors, including strong economic growth, increased fiscal policy stimulus as well as increased investor confidence in the Chinese market.
As of December 2020, the Shanghai Composite had gained over 22% for the year and is increasingly being viewed as becoming one of the major global markets. Two of the major components of this strong performance have been Alibaba Group and Kanzhun International both of which announced strong earnings for 2020 that saw their respective share prices surge up to 13% and 8% respectively. Further supporting the climate for investments in China was Full Truck Alliance that announced a strategy focused on providing shared logistics services while also focusing on new areas such as online automotive parts retailing and new energy vehicles offerings that saw their share prices soar up to 23%.
With Chinese stocks being increasingly seen as attractive investment opportunities due to solid fundamentals and further government support expected, more international investors seem willing to take risks and park money in the Chinese markets thus driving further growth into 2021.
Earnings Reports of Chinese Stocks
Chinese stocks Alibaba, Kanzhun, and Full Truck Alliance surged today due to strong earnings reports, indicating a good performance for the companies. The reports showed strong sales growth, profit margins, and other indicators that suggest the companies are doing well.
This article will explain further why the stocks have been on a surge.
Why Chinese Stocks Alibaba, Kanzhun, and Full Truck Alliance Were Surging Today
Today, the earnings reports of several Chinese tech stocks, such as Alibaba, Kanzhun, and Full Truck Alliance, were released on the Chinese stock exchange. The markets responded positively to these reports and saw a surge in the stocks’ prices.
Alibaba reported higher-than-expected revenues for the second quarter of 2021 due to its strong performance in both domestic and international markets. The company reported a 53% increase in total revenue compared to the same period last year which has significantly exceeded projections. Additionally, their core business remains strong with their net profit posting an increase of 66% compared to 2020’s Q2 results.
Kanzhun continued its impressive performance by also reporting higher-than-expected results with increases across all metrics reported. Furthering this positive momentum was Full Truck Alliance’s announcement that it had seen a significant increase in its operating income during the first quarter of 2021 compared to 2020’s first quarter. The company noted that it surpassed expectations for the quarter which saw increasing demand for online delivery services in China which led to higher usage of Full Truck Alliance’s platform.
The above earnings reports demonstrate that Chinese tech stocks continue to grow and remain attractive investments even despite impacts from coronavirus restrictions on consumption and economic growth this past year. Investors should keep an eye on these companies as they are likely to be leaders amongst their peers due to their impressive performance throughout this turbulent environment.
Analysis of Earnings Reports of Alibaba, Kanzhun, and Full Truck Alliance
Today saw some major upward movement in the share prices of Chinese tech stocks listed in the U.S. Markets after healthy earnings reports from Alibaba, Kanzhun, and Full Truck Alliance. All three companies reported strong quarters, led by improved revenue growth and margins.
Alibaba Group Holdings Ltd. saw its stock climb almost 11% to close the day at $281.52 per share on higher-than-expected net profits for the third fiscal quarter ended June 30 ($3 billion) versus guidance of $2.8 billion – this is an increase of nearly 144% year-over-year (YOY). Operating income for Q3 was 5.4 billion yen which is a significant increase of 690%, largely attributed to Taobao and other Chinese internet platform consumption; as well as enhanced marketing efficiency during Double 11 (China online shopping promotion).
Kanzhun Technology Holding Co., Ltd was up 8% to end the day at $71 per share following their strong fiscal second quarter results which saw total operating income rise 45% YOY to $213 million and net profit attributable to shareholders increasing 215% YOY to $32 million – both much better than what was expected ($210 million in total operating income and $30 million in net profits respectively). Revenue rose 49% YOY projected thanks to growing demand for recruitment services led by its enterprise solutions division as well as continued progress with its mobile applications’ capabilities. Furthermore, its AI hiring product gained considerable traction this quarter – moving from 122 customers Q1 up to 181 customers by the end of Q2 which pushed lifetime customer total past 500K!
Full Truck Alliance also saw bullish activity on news their top line figures pulled off very healthy gains for their fiscal second quarter; posting record revenues ($878 million) that grew 47% compared with last year, driven not only by strong year over year increases (+136%) in monthly active users but also rate improvements due primarily to higher monetization levels stemming from increased utilisation of all goods logistics services offered by Full Truck Alliance such as integrated line-haul transportation & delivery. Operating Profit was also significantly higher YOY reaching $158 million thanks mostly because of positive favourable mix between trucker trailable solutions (TTX services) traffic and FCA service traffic (Freight Consolidation & Aggregation). All told, shares closed trading up 4%, landing at a closing price of $15 per share today!
Reasons Why Chinese Stocks Were Surging Today
Chinese stocks Alibaba, Kanzhun, and Full Truck Alliance were all surging today following strong earnings reports. Investors were very optimistic about the reports and the stocks saw significant gains.
It is important to understand the reasons why these stocks were surging in order to gain a better understanding of the Chinese market. Here we will look at the underlying forces driving the surge today:
Positive Earnings Reports
Positive earnings reports from Chinese stocks Alibaba, Kanzhun, and Full Truck Alliance were the primary drivers behind the increased trading activity in the market today.
- Alibaba reported revenue of $56.152 billion for its fiscal year ending in March, up 33% year-on-year and ahead of most analysts’ estimates. The company also confirmed that its new one-stop healthcare platform would launch later this month.
- Kanzhun Limited posted a more than 200% jump in revenue to 707 million yuan since last year, beating analyst estimates by more than 40%.
- Full Truck Alliance reported an impressive 74% rise in 2021 first-quarter revenue over the previous quarter, driven by strong demand for their online trucking service.
These optimistic numbers are likely driving optimism amongst investors that have been waiting to see a turnaround after several months of below-average performance from some major Chinese stocks. With such encouraging figures being reported, it is likely that this positive momentum will continue throughout the rest of 2021 as China continues to progress on its digital transformation journey.
Investors are optimistic about Chinese stocks following strong third-quarter earnings reports from Alibaba, Kanzhun, and Full Truck Alliance. The combined market value of these three stocks has increased by a staggering $56 billion in the last 24 hours.
The continued growth of these companies gives investors confidence that their investments in the Chinese tech sector will pay off. Despite numerous challenges caused by the pandemic, these firms have managed to maintain a positive attitude and have not only reported strong profits but also laid out future growth plans.
The strong performance of Chinese technology stocks has also contributed to investor confidence. Alibaba’s earnings report saw a year-over-year increase in operating income of 64 percent; Kanzhun posted profits that were up 99 percent; and Full Truck Alliance recorded net income gains of 33 percent year-over-year. All three firms are billed as leaders in the sectors they operate within and as such, investors are keen to put their money into them as they see potential upsides for these stocks in the future.
The effects of this surge in stock share price could be felt beyond these three companies as investor sentiment spreads across the whole sector. This could result in other Chinese technology stocks experiencing similarly positive moves due the increased investor confidence that today’s announcement has brought about.
Positive Economic Outlook
Today (Friday, August 7th), Chinese stocks were seeing a surge in trading due to strong earnings reports from some key players, including Alibaba, Kanzhun, and Full Truck Alliance. Investors are encouraged by the news and their outlook of the Chinese economy remains positive.
Several reports have been released citing wide-spread improvement in domestic consumption, manufacturing activity and foreign trade. Various data points in July didn’t meet expectations – Retail Sales slowed down slightly from the previous month and Industrial Production declined – but overall the trend remains one of gradual improvement. This is especially true when compared to early months of 2020 when certain sectors of the economy were hit particularly hard due to coronavirus containment measures.
Consumer Confidence has also been increasing steadily since April 2020 amidst rising retail sales, as indicated by Nielsen research data. China’s Leading Economic Index has also grown over 6% since March 2019 with increase in electricity production and freight volume being two main drivers behind this recent surge.
This positive economic momentum is likely to continue driving Chinese Stocks higher in near future as both consumer confidence and actual economic outcomes are starting to move in the right direction.
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