Baidu Inc BIDU shares are trading higher by 15.0% to $106.29 over the trailing week, driven by investor enthusiasm over the latest economic stimulus measures implemented by the People's Bank of China (PBoC) and a surprisingly strong Purchasing Managers' Index (PMI) report.
The rally comes as investors look forward to how China's economic policies could fuel growth for major tech companies like Baidu, which has been at the forefront of China’s AI revolution.
What Happened: The PBoC unveiled aggressive monetary easing measures in response to growing concerns about the slowing Chinese economy, including a 50-basis-point cut to the reserve requirement ratio (RRR) for commercial banks, which effectively released 1 trillion yuan ($140 billion) into the banking system.
This is expected to boost liquidity and promote lending, which is especially crucial for large-cap companies like Baidu, given its strategic position in China’s tech sector. In addition, the PBoC also slashed the seven-day repo rate by 20 basis points to 1.5%, signaling that Chinese policymakers are committed to stabilizing the economic slowdown.
The central bank's policy shift, which occurred alongside reports that China plans to issue up to $284 billion in sovereign debt for additional stimulus, has raised hopes that broader fiscal support is on the horizon.
For Baidu, these developments offer a favorable backdrop, as the company’s revenue streams from its core AI, cloud services, and autonomous driving sectors could benefit from an uptick in economic activity fueled by increased liquidity.
What Else: Baidu's dominant position in China's AI landscape has made it a key beneficiary of government policies focused on digital innovation. The company's Apollo platform, which leads China's autonomous vehicle technology, and its AI-driven cloud computing division, both stand to gain from the increased lending capabilities of commercial banks.
The rally in Baidu's stock was further supported by positive economic data. China's official PMI for September beat expectations, registering at 50.2, up from August's reading of 49.7, signaling an expansion in manufacturing activity, despite continued declines in factory output.
This stronger-than-anticipated PMI raised hopes that the worst of China's economic struggles may be abating, even as factory output contracted for the fourth consecutive month. Investors are interpreting this data as an early indicator that recent stimulus efforts could be gaining traction, heightening expectations for further fiscal measures from Beijing.
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How To Buy BIDU Stock
By now you're likely curious about how to participate in the market for Baidu – be it to purchase shares, or even attempt to bet against the company.
Buying shares is typically done through a brokerage account. You can find a list of possible trading platforms here. Many will allow you to buy ‘fractional shares,' which allows you to own portions of stock without buying an entire share. For example, some stock, like Berkshire Hathaway, or Amazon.com, can cost thousands of dollars to own just one share. However, if you only want to invest a fraction of that, brokerages will allow you to do so.
In the the case of Baidu, which is trading at $108.55 as of publishing time, $100 would buy you 0.92 shares of stock.
If you're looking to bet against a company, the process is more complex. You'll need access to an options trading platform, or a broker who will allow you to ‘go short' a share of stock by lending you the shares to sell. The process of shorting a stock can be found at this resource. Otherwise, if your broker allows you to trade options, you can either buy a put option, or sell a call option at a strike price above where shares are currently trading – either way it allows you to profit off of the share price decline.
According to data from Benzinga Pro, BIDU has a 52-week high of $135.81 and a 52-week low of $79.69.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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