Shares of several Chinese stocks listed on US exchanges rose today as parts of China, including Beijing and Shanghai, reopened after months of COVID-19-induced lockdowns that hampered economic activity.
Real estate company shares KE Holdings (NYSE: BEKE) was trading nearly 12% higher at 10:35 a.m. ET today. Actions of the online recruitment platform Kanzhun Limited (NASDAQ:BZ) was trading almost 10% higher, and the shares of an education company New Eastern Education and Technology Group (NYSE: EDU) traded over 11% higher.
Over the weekend, the Chinese government began easing COVID-19-related restrictions and lockdowns that have hampered the economy and frustrated residents for months now. For about two months, Shanghai residents have been facing restrictions ordering them to stay at home. Beijing has only had to lock down certain neighborhoods but has faced various COVID restrictions over the past month. On Sunday, China reported just 54 COVID cases nationwide, including eight in Beijing and six in Shanghai.
The restrictions have not only been problematic for Chinese citizens and businesses, but also for the Chinese government; its economic target of 5.5% gross domestic product (GDP) growth this year now looks out of reach. Many major bank analysts predict much weaker GDP growth for the country this year.
“Local customers are concerned about the scarring effects of anti-pandemic measures and slowing growth, which include heightened uncertainties around the economic and political outlook, higher numbers of bankruptcies and high unemployment rates,” Goldman Sachs analysts said in a recent research note.
Elsewhere, KE Holdings announced this morning its earnings results for the first three months of the year. Adjusted earnings per US Custodian share of $0.08 beat analysts’ estimates of $0.13. Revenue of $1.98 billion beaten by $230 million.
Yet despite the pace of the quarter, the conditions were anything but easy. The company’s gross trading volume fell 45% year over year, while net revenue fell 39% over the same period.
“There is no doubt that we are being tested this year on many fronts, but we are convinced that the value we bring to our customers gives us a sustainable competitive advantage in good times and in bad times. We are ready to manage through this difficult phase, stay tenacious and optimistic as always, develop new abilities and come out stronger,” CEO Stanley Yongdong Peng said in a statement.
The good news is that the Chinese government is easing restrictions related to COVID-19, which seem to have really hurt many parts of the economy. Also, many Chinese companies seemed to be reporting better than expected results. earnings in the first trimester, although the first trimester was largely before the restrictions, so there may be some pain felt in the second trimester.
The economic environment is still not easy, but I hope businesses can resume operations now. The Chinese government also seems to want to get economic growth back on track, which it has shown by boosting and adopting a much more supportive attitude, especially towards Chinese tech companies.
Chinese stocks are always complicated, due to the amount of regulation that can impact these businesses, but with a huge sell-off over the past year and huge market opportunities, maybe it’s time to start look for bargains. Whenever you research Chinese stocks, be sure to take a close look at the impact of regulation on the specific stock you are looking at and consider downside scenarios if COVID-19 cases reappear.
10 stocks we like better than KE Holdings Inc.
When our award-winning team of analysts have stock advice, it can pay to listen. After all, the newsletter they’ve been putting out for over a decade, Motley Fool Equity Advisortripled the market.*
They have just revealed what they believe to be the ten best stocks for investors to buy now…and KE Holdings Inc. was not one of them! That’s right – they think these 10 stocks are even better buys.
* Equity Advisor Returns as of April 27, 2022
Bram Berkowitz has no position in the stocks mentioned. The Motley Fool fills positions and recommends Goldman Sachs. The Motley Fool recommends New Oriental Education & Technology Group. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.