Chinese Stocks Soar as Regulators Move to Prop Up Economy

Top Chinese stocks, including Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU), and NIO (NYSE:NIO) are surging in the pre-market session today after the country’s regulators began taking steps to prop up its battered economy and financial markets.

China’s central bank plans to slash the cash reserve ratio for banks by 0.5% next month. This move is expected to add long-term liquidity to the tune of nearly $139 billion into the Chinese economy. According to Bloomberg, Chinese authorities are also looking at a $278 billion rescue package as part of a stabilization fund. Earlier this week, Chinese Premier Li Quiang asked the country’s regulators to resort to “Forceful” measures to prop up the Chinese equity markets. The statement came after a major rout in equities that has wiped off over $6 trillion from Chinese and Hong Kong stocks since 2021 highs.

This value erosion came as foreign investors shied away from Chinese equities, preferring greener pastures in other emerging markets. While consensus slowly seems to be rising that Chinese stocks are once again hovering at attractive valuations, fund managers may wait for further positive changes before wading in.

Meanwhile, Ray Dalio’s Bridgewater Associates is already viewing China moderately favorably. At the other end of the spectrum, Asia Genesis Asset Management, a Singapore-based hedge fund, recently closed its $300 million macro fund after dropping by nearly a fifth in the first two weeks of 2024 as a consequence of going long on China and short on Japan. 

What is the Best China Stock to Buy?

As China stocks gain some breathing space, short sellers may look to cut down on risk. For investors, the TipRanks Comparison Tool indicates a mouth-watering upside of over 80% in two Chinese names, JD (NASDAQ:JD) and Li Auto (NASDAQ:LI).

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