Daiwa reaffirms positive outlook on Chinese internet stocks, prefers Tencent, Alibaba, and Trip.com

Daiwa published a research report stating that after recent meetings with investors, it found that Xiaomi (01810.HK), Alibaba (09988.HK)(BABA.US), Meituan (03690.HK), Baidu (09888.HK)(BIDU.US), and Tencent (00700.HK) were the most frequently discussed stocks, with investors generally focusing on the theme of artificial intelligence. Although global funds still hold a relatively low proportion of Chinese internet stocks, Daiwa pointed out that most investors believe the likelihood of a significant shift towards increasing holdings in the short term remains limited.

The firm noted that Tencent continues to be the most widely held stock, with investors primarily viewing the increase in capital expenditure budgets as a key catalyst for the coming quarters, and they are optimistic that game revenue growth will remain strong driven by a robust product pipeline. Additionally, Daiwa indicated that Alibaba is still regarded as the best AI proxy stock in China, maintaining a positive outlook in line with the market.

The firm reiterated its positive outlook on the Chinese internet sector, with preferred stocks being Tencent, Alibaba, SEA (SE.US), and Trip.com (TCOM.US), all rated as "Buy," and it is optimistic about Baidu and Pinduoduo (PDD.US). Daiwa pointed out that investors are viewing Baidu, Pinduoduo, Kuaishou (01024.HK), and Bilibili (09626.HK)(BILI.US) as tactical buying options, while JD.com (09618.HK) is being watched for its earnings recovery turning point