According to the research report, the bank introduced the concept of a three-stage investment model in China's Internet industry in its report released on March 14 this year. Given the increased uncertainty caused by 6-12 months of regulation, delisting and geopolitical risks, the bank sees China's internet industry as unattractive in the first stage of valuation. Judging from the data, the implied volatility of Tencent and BABA increased 7-8 times during the period, while the volatility of KWEB (Internet ETF-KraneShares) peaked in mid-March.

However, Motors also pointed out that the industry entered the second phase mentioned in the previous report just two months later, rather than the 6-12 months the bank had expected, prompting it to delve deeper into the industry's short-term and long-term fundamentals.

Motors expects that at this stage, industries in the "early cycle", such as digital entertainment, local services and e-commerce, will be the first to outperform the market, while vertical sectors such as tourism and advertising recover 1-2 quarters later than the "early cycle" industry. The order of stock selection for China's Internet industry is as follows:$Meituan-W (03690.HK) $、$NetEase, Inc-S (09999.HK) $、$Tencent (00700.HK) $、$Kuaishou Technology-W (01024.HK) $、$BABA-SW (09988.HK) $及$Pinduoduo (PDD.US) $. (the monetary units in the following table are Hong Kong dollars)