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Alibaba, Meituan are top picks at Daiwa in sector upgrade as internet stocks to benefit most from China stimulus
- Daiwa upgraded online platform providers traded on Hong Kong’s markets to overweight from neutral
- The so-called platform economy is one of the most promising areas for policymakers to boost growth, say Daiwa Research analysts
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Daiwa Capital Markets analysts are betting that Chinese internet stocks will benefit the most from policy stimulus and a clearer picture of the direction of earnings in the second half of the year.
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The so-called platform economy is one of the most promising areas for policymakers to boost growth, given that other possibilities such as infrastructure and property stimulus are restricted by local governments’ strained fiscal budgets, said Daiwa Research analyst Patrick Pan, in a report dated July 22.
Daiwa upgraded “communication services” traded on Hong Kong’s markets to overweight from neutral, with Alibaba Group Holding and Meituan, a food delivery platform, being their picks for a sector that includes online businesses.
“We view the [internet] sector as a key beneficiary of policy stimulus and loosening regulations, thus anticipating improving earnings visibility from 2H22 onwards, amid the economic cyclical uptrend,” said Pan.
The internet giants may even deliver positive earnings surprises for the June quarter as they spend cautiously, trim headcount and scale back some operations, said John Choi, head of China internet at Daiwa.
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Alibaba, the owner of this newspaper, reports next Thursday, while Tencent releases its June earnings on August 17.
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