2024.04.02 01:17
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"After a big drop, the valuation is attractive!" PIMCO's fund increases holdings in Chinese concept stocks

PIMCO analysts believe that Chinese concept stocks currently appear attractive from a value perspective, with Internet companies such as Alibaba and Tencent trading at historically low valuations. In September 2023, the PE ratio of Chinese concept Internet stocks was 15.7 times, while in March 2024, the PE ratio dropped to around 13 times, reaching a low point

Pimco's quantitative fund is shifting towards Chinese tech stocks, citing attractive valuations after a sharp decline.

Recently, Chris Brightman, Chief Investment Officer of Research Affiliates LLC, a quantitative fund under Pacific Investment Management Company (PIMCO), stated in a media interview that internet companies such as Alibaba and Tencent have seen their valuations drop to historic lows, making their stock prices very appealing. "From a value perspective, Chinese tech stocks currently appear quite attractive, while Indian stocks, on the other hand, are very expensive."

Media reports indicate that Chris Brightman's view is similar to that of some other fund managers. They believe that with the strong momentum of China's economic recovery in recent times, Chinese tech stocks could see a significant rebound if the right catalysts emerge.

According to data, based on earnings expectations for 2023, the PE ratio for Chinese internet stocks in September 2023 is 15.7 times, in December 2023 it is 14.2 times, and by March 2024 it has dropped to around 13 times, reaching a low point.

In overnight trading, popular Chinese tech stocks rose across the board, with the Nasdaq Golden Dragon China Index (HXC) closing up 1.9%, outperforming the broader market and rising for the third consecutive day to a high since March 21. The KraneShares CSI China Internet ETF (KWEB) rose by 2.25%, Alibaba by 1.4%, and JD.com by over 1.3%.

Currently, the PE ratio of the Nasdaq Golden Dragon China Index is only 20 times, while the PE ratio of the US Nasdaq Index has reached 30.05 times. From a valuation perspective, Chinese tech stocks are quite attractive.

According to compiled media data, even as some well-known investors reduced their market exposure during this period, Pimco's RAE Emerging Markets Fund, which holds a large amount of Chinese stocks, helped it outperform 94% of its peers over the past year.

March is the performance disclosure period for Chinese tech stocks. Based on the existing performance disclosures, it is basically in line with market expectations. Analysts point out that existing Chinese internet companies have stable growth, low valuations, reasonable dividends, and may be the best investment opportunity.

On one hand, leading companies continue to see profit growth, such as Tencent, Alibaba, Pinduoduo, etc.; on the other hand, previously loss-making companies are quickly turning profitable, such as Meituan, Kuaishou, etc.

At the same time, most Chinese tech stocks are gradually increasing shareholder returns, providing more returns to shareholders through dividends and buybacks. According to available data, 20 companies have implemented buybacks and dividends, with the amount of returns increasing year by year. Some believe that Chinese tech stocks have transitioned from growth stocks to " high-yield stocks," as many Chinese tech companies have already outlined shareholder return plans for the coming years, indicating that the intensity of shareholder returns is expected to further strengthen in the future