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Nio, Alibaba shares jump as China breakout rally looks set to continue: analyst

By Tomi Kilgore

J.P. Morgan says 'more positive' trading in stocks of China-based companies could last through the summer

U.S.-listed shares of China-based companies were enjoying a broad rally Monday, and J.P. Morgan said their run-up since the start of the year could continue over the next several months despite all the apparent headwinds.

The rally and J.P. Morgan's view come as trade friction between the U.S. and China is expected to increase, with the Biden administration possibly announcing new tariffs as soon as Tuesday. Those tariffs could include a quadrupling of the tariff rate, to 100% from 25%, on electric vehicles imported from China.

Among the more active stocks of China-based companies, shares of EV maker Nio Inc. (NIO) charged up 6.3% in morning trading, more than erasing the 4.9% drop suffered on Friday after reports of the tariff increases surfaced.

The stock has rocketed 41.8% since closing at a four-year low of $3.80 on April 19.

Fellow EV maker XPeng Inc.'s stock (XPEV) rallied 6.2%, after falling 5.3% on Friday.

And e-commerce giant Alibaba Group Holding Ltd.'s stock (BABA) climbed 6% toward a six-month high on Monday. It has gone up 13.4% this month, which would be the biggest monthly gain since it soared 22.6% in July 2023.

Meanwhile, the iShares MSCI China exchange-traded fund MCHI jumped 2.2% toward a nine-month high. In comparison, the S&P 500 index SPX inched up less than 0.1%.

After a "terrible spell" in which the MSCI China ETF plunged 36% from the January 2023 closing high to the January 2024 closing low, it has soared more than 25% off that January low.

J.P. Morgan's equity strategy team said while longer-term structural concerns such as a "deflationary backdrop, excess capacity, real-estate demand-supply imbalances, credit saturation and global decoupling" are expected to remain, they believe at least the housing weakness is potentially in the past. And that should keep the rally going.

"We believe that the tactically better China trading can last somewhat longer, perhaps until July-August, before the U.S. elections heat up in earnest," the team wrote in a note to clients.

Among the U.S.-listed shares of other China-based companies, EV maker Li Auto Inc.'s (LI) gained 1.7% and BYD Co.'s (BYDDY) (CN:002594) tacked on 1.3%.

Elsewhere, online entertainment company Bilibili Inc.'s stock (BILI) powered up 14.1%, shares of e-commerce company Inc. (JD) advanced 6.6%, shares of online entertainment company Tencent Music Entertainment Group (TME) tacked on 8.6% and fellow online entertainment company IQiyi Inc.'s shares (IQ) gained 5.8%.

-Tomi Kilgore

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.


(END) Dow Jones Newswires

05-13-24 1145ET

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