2 weeks Ago
Shares of e-commerce giants in China look attractive as Beijing attempts to stimulate domestic consumption, according to investor Jason Hsu. Hsu, founder and chairman of Rayliant Global Advisors, told CNBC's Pro Talks that Alibaba , JD.com , and Pinduoduo are among his top picks.
He also revealed a more cautious stance toward Baidu over company specific factors. The Chinese government is expected to announce details on highly anticipated fiscal stimulus in the first week of November in a bid to boost growth amid a slowing economy. Alibaba (BABA) and JD.
com "BABA and JD.com have probably traded too cheap on such a pessimistic expectation on consumption growth that now, with the Beijing turnaround, investors are seeing opportunities," Hsu told CNBC's Tanvir Gill on Wednesday. "This is the catalyst to go back in.
" China's economy grew by an annual 4.8% in the first three quarters of the year, slightly slower than the 5% pace observed in the combined first half of the year. Beijing has a target of around 5% economic growth for 2024.
On Alibaba, the investor predicted the stock could rally from its current beaten-down levels, potentially reaching $150 per share in the near term, indicating a 50% upside forecast. If signs of consumption growth return to China, he suggested the stock could climb to $200 per share or double from current levels. Alibaba's New York-listed stock has risen 30% this year, and Wall Street analysts expect it to increase by another 17% over the next 12 months.
BABA 1Y line Hsu said he views JD.com similarly to Alibaba, with his preference between the two mainly driven by valuation metrics. "Over-weighing one versus the other is purely based on where they're trading at right now, in terms of valuation ratio, and BABA is cheaper, so we like it a bit more for that reason," he added.
Hsu manages a range of ETFs, including the Rayliant Quantamental China Equity ETF , which seeks to "exploit mispricings among Chinese stocks traded in markets around the world." PDD Pinduoduo underperformed the broader Chinese stock market this year and has fallen by 14% so far this year. However, the e-commerce giant, which owns the Temu platform, has actually been gaining market share through aggressive marketing and discounting business.
In August, the stock fell by more than 30% on a single day after revealing that it beat expectations on earnings per share, operating income and profit margin but missed revenue forecasts. The platform has successfully captured budget-conscious consumers during China's recent economic slowdown, according to Hsu. "They've been getting market share because of the different buying format, but also just the significantly cheaper price," he added.
Baidu Not all Chinese technology stocks are equally attractive. Rayliant's founder was critical of technology giant Baidu over the company's efforts to diversify beyond internet search, which has not progressed as expected. "Our primary concern with Baidu is, as an internet search engine, it is a one-trick pony," he noted after the company's stock has fallen by more than 23% this year.
"It certainly doesn't have the diversified capability appeal of, say, a Google." While Baidu has attempted to expand into artificial intelligence and electric vehicle technology, these initiatives have yet to generate significant profit streams. "It's partnering really hard with anyone and everyone who wants to tap Baidu perhaps for their AI capabilities, but not much of it has really panned out [and] turned into actual profit streams," Hsu added.
"We think the AI story may have sunsetted on Baidu, and it will go back to being a one-trick pony." — CNBC's Evelyn Cheng contributed reporting..
