Why JD.com, PDD Holdings, and Baidu stocks all fell by double digits in January

Chinese stocks have taken a hit over the past month as weak economic data, Chinese government intervention in stock sales and ongoing regulatory concerns have led to a broader decline in the sector.

Among the losers JD.com (J.D. -1.98%), PDD Holdings (PDD -1.58%)and Baidu (start -2.09%)They fell 22%, 13.3% and 11.6% this month, according to data from S&P Global Market Intelligence. that much iShares MSCI China ETF (March -1.77%) Monthly trading volume fell 10.3%, showing an overall decline in Chinese stock markets.

Here’s how each stock performed last month:

JD Data from YCharts

Chinese stock market continues to struggle

Chinese stocks got off to a false start as the country reported GDP growth of just 5.2% in 2023. While this would be a good pace for any country, it was China’s lowest annual growth rate in 30 years, with GDP growing at 4.1% in the fourth quarter. It is expected to maintain this level in 2024.

Some investors were nervous that the Chinese government had ordered some fund managers returning to Japan from China not to sell Chinese stocks. At the end of this month, the court ordered liquidation. China Evergrande Group, was once the country’s largest real estate developer. This was the latest sign of weakness in China’s real estate sector.

These news items all put further pressure on Chinese stocks, while JD, PDD, and Baidu faced their own challenges.

JD.com has had its worst performance over the past three months, despite little company-specific news about the stock. JD stock fell sharply as the company recorded nearly flat growth through 2023. It lost market share to PDD Holdings Pinduoduo, which is growing rapidly through a social commerce model that provides discounted prices to group buyers.

Last December, founder Richard Liu called for the company to become more competitive and acknowledged that JD.com is big, bloated and inefficient. The remarks echoed calls for similar action. Alibaba Founder Jack Ma.

Meanwhile, PDD Holdings was able to avoid the overall weakness in the Chinese market in the first half of the month, but saw a decline in late January.

This weakness appears to be related to analysts’ comments that the boom in Temu e-commerce apps in international markets may be peaking. Temu’s success helped PDD increase its revenue by 94% in the third quarter. But that growth is likely to slow soon. Because it’s difficult for retailers to double their sales every quarter. This is especially true for companies with sales approaching $40 billion. .

Finally, Baidu’s stock price fell in the middle of the month after an article linked its Ernie AI platform to military research. That could trigger a response from the U.S. government, which has already tightened restrictions on chips that can be exported to China.

China’s search leader Baidu denied the reports, but that did little to spark a recovery in its stock price.

Image source: Getty Images.

Will the Chinese stock market recover?

At this point, there appears to be little reason to expect a recovery in China’s technology sector. apologize It recently reported a decline in sales in China, providing further evidence of a weak economy. PDD has emerged victorious with rapid growth, but the overall economic outlook looks difficult.

If you’re looking for Chinese stocks, PDD seems to make the most sense here given its rapid growth. Baidu’s AI chatbots also look promising, but investors may want to approach this space cautiously as China’s economic instability looks set to continue.