JPMorgan Remains Bullish On Alibaba And Other Chinese Stocks - Here's Why

JPMorgan saw some respite for the Chinese stocks like Alibaba Group Holding Limited BABA and Tencent Holding Ltd TCEHY following relaxation in lockdowns and regulatory pressures, CNBC reports.

Chinese markets got ravaged due to its "zero-Covid" strategy and lockdowns stifling economic activity, with a double whammy from the regulatory crackdowns.

The retreat reflects China's realization of the unsustainability of the Covid policy and some respite in their regulatory approach towards the tech titans to stimulate the economy, strategist Tilmann Galler said.

Also Read: Read What It Will Take For Alibaba's Most Accurate Analyst To Reverse His Sell Recommendation

Galler argued that while near-term uncertainties continue, fundamental headwinds like the zero-Covid policy, tight fiscal policy, and strict regulation were cyclical rather than structural. He saw the bad news already priced into Chinese equities.

He expressed optimism over the policy makers and the central bank, further easing the monetary policy.

Galler highlighted more money earmarked for the railway, infrastructure investment, airport investment, tax cuts, purchase incentivization for cars, for the car market.

He noted strength in the credit growth, which had historically been a positive indicator for the stock market. Galler believed that the long-term growth drivers for China were still valid.

JPMorgan's strategist head acknowledged that Chinese government debt was the most exciting pocket of global markets and an excellent diversifier for the European and U.S. fixed income.

China markets continued to suffer over potential U.S. fed rate hike to contain the surging inflation.

Shanghai and Beijing relieved some Covid measures earlier last week before imposing some additional restrictions once again on June 10.

JPMorgan recently cited several reasons for its bullishness in the Chinese tech sector within months of changing its stance.

Price Action: BABA shares traded lower by 4.32% at $105.09 in the premarket on the last check Monday.

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