After a historic sell-off, foreign institutions are re-examining the investment value of China's Internet technology companies. On May 16, JPMorgan Chase & Co suddenly took a "bullish view" on Chinese Internet technology stocks and collectively raised the rating and target price of Chinese Internet technology stocks. It pointed out that the short-term and long-term fundamental outlook is being re-examined, China's Internet industry is getting rid of all kinds of uncertainty, and the share price of the head company may rise higher than expected in the future.

Second, Wall Street "top" institutions have spent real money to copy the bottom of Chinese stocks. Among them, JPMorgan Chase & Co's flagship China Fund substantially increased its position in JD.com by 1253% in the first quarter, while Qiaoshui Fund and Foda International also increased their holdings in Tencent, BABA, Meituan, Pinduoduo, Baidu, Inc. and other Chinese Internet technology stocks.

The risk is rising, the opportunity is falling out. Under a ferocious sell-off, the biggest drop in the Hang Seng Technology Index since January 2021 has been more than 63%. The total market value of the 30 constituent stocks once lost more than HK $13 trillion, which is not tragic.

From the current point of view, whether China's Internet technology stocks have reached the cheapest time? Have new opportunities for the future come?

Overturn in an all-round way

On May 16, JPMorgan Chase & Co's latest research report once again sparked a heated debate. This research report has a very clear point of view. It is bullish on China's top Internet technology companies in an all-round way. Its latest investment ratings for some of the top companies are as follows:

Tencent's rating was upgraded to "overmatch", with a target price of HK $470
BABA's rating was upgraded to "overmatch" with a target price of HK $130.
NetEase, Inc's rating was upgraded to "overmatch" with a target price of HK $185,
Meituan's rating was upgraded to "overmatch" with a target price of HK $220,000,000.
JD.com Group's ADR and H shares were upgraded to "neutral"
Baidu, Inc. 's ADR rating was upgraded to "neutral" with a target price of US $125,
Bilibili Inc. H-share rating was upgraded to "neutral".

JPMorgan Chase & Co gave the reasons for being bullish in an all-round way in his research report, pointing out that the short-term and long-term fundamental prospects are being re-examined. China's Internet industry is getting rid of all kinds of uncertainties and will be driven by short-term and long-term fundamentals. The share price of the head company may rise higher than expected in the future.

Specifically, JPMorgan Chase & Co believes that leading enterprises in segments such as digital entertainment, local services and e-commerce will become the first batch of stocks to outperform the market, while the start-up time of tourism, advertising and other sub-sectors may be delayed by 1-2 quarters.

JPMorgan Chase & Co further said that e-commerce and local service operators may produce more direct revenue performance than the field of digital entertainment, while the game industry may be the best performing small molecule industry in the field of digital entertainment.

Another reason for the heated discussion about this comprehensive bullish research report on US-listed stocks is that JPMorgan Chase & Co's point of view is reversed too fast.

According to a research report released by JPMorgan Chase & Co on March 14 this year, the collective downgrade of the rating and target price of US-listed stocks once aroused investors to question the authenticity of their report. Specifically:

Tencent's rating was downgraded to underweight, and the target price was reduced from HK $570 to HK $265.
BABA was downgraded to underweight, and the target price was reduced from HK $175to HK $63.
Meituan's rating was downgraded to underweight, while the target price was reduced from HK $295 to HK $90.
JD.com was downgraded to underweight, and the target price was lowered from HK $380 to HK $135,
NetEase, Inc's US shares were reduced to underweight, with the target price falling from $125to $60.

Its March research report even said that Chinese Internet companies such as JD.com, BABA and Tencent are "not allowed to invest" in the short term. After the release of this research newspaper, it was once criticized and questioned by Wall Street investors.

According to people familiar with the matter, JPMorgan Chase & Co conducted an internal investigation into the research newspaper and concluded that before its release, the analysts and directors who wrote the research paper thought that "non-investable" was an inappropriate word, but because of editorial mistakes, failed to delete "non-investable" from the report.

It is worth mentioning that BABA, Tencent, JD.com and other Chinese Internet leaders will disclose their financial results for the first quarter of 2022 within this week, while at this time, JPMorgan Chase & Co suddenly "overturned in an all-round way" may smell the signal that the performance of Chinese stocks has hit bottom and rebounded.

Real gold and silver "copy the bottom"

The "attitude" of funds is always the most real.

In the first quarter of the "bearish" reportJPMorgan Chase & CoBut in the real money and silver "bottom" China's Internet core assets. According to Morningstar, JPMorgan Chase & Co's flagship China fund "JPMorgan Funds-China Fund A (acc)-USD" significantly increased its position in JD.com by 1253% in the first quarter. By the end of the first quarter, JD.com had become the fourth largest stock in the fund, with a market capitalization of $212 million. In addition, the fund also has a small increase in positions on Tencent and BABA.

In addition, other Wall Street "top" funds have also increased their positions in Chinese Internet technology stocks at low levels. Among them, the Bridge Water Fund increased its holdings in BABA, Pinduoduo, Baidu, Inc. and other leading enterprises in the first quarter of this year.

据Bridge Water FundThe latest position report to the Securities and Exchange Commission (SEC) shows that in the first quarter of 2022, the Bridge Water Fund increased its holdings of BABA by 3.2122 million shares, the highest increase in a single quarter, with an increase of 75%. The number of shares rose to 7.48 million shares, and the market value of the position reached $814 million, making it the sixth largest stock. Increase the holding of 2.2775 million shares of Pinduoduo, an increase of more than 85%, the number of shares increased to 4.9394 million shares, with a market value of $198 million; and the holding of 376600 shares of Baidu, Inc., an increase of 50%, with a market value of $149 million.

But Qiaoshui reduced its stake in JD.com by 19% in the first quarter, reducing its market capitalization to $124 million. In addition, the Bridge Water Fund directly cleared Tesla, Inc. in the first quarter.

Data show that by the end of the first quarter, Qiaoshui's overall position reached $24.807 billion, an increase of 44 per cent over the previous quarter, and the concentration of the top ten heavy stocks was 33.94 per cent.

In addition to JPMorgan Chase & Co and Qiaoshui FundFidelity InternationalIt is also "bottoming" Chinese Internet technology stocks. In March, Fidelity's China Consumer Power Fund significantly increased its holdings in Internet stocks such as Meituan and JD.com by 20.27% and 10.22%, respectively, with a market capitalization of $180 million and $139 million, respectively, according to Morningstar.

The fund's first and second largest stocks are Tencent and BABA, which also increased their positions slightly in March by 4.26% and 0.96%, respectively.

In the first quarter of 2022, hundreds of billions of private equity giantsJinglin assetsAlso has carried on the substantial increase position to the Chinese stock. Specifically, it increased its positions in NetEase, Inc, KE Holdings Inc., JD.com and KANZHUN LIMITED, and the number of positions increased to 827000 shares, 10.88 million shares, 3.087 million shares and 1.521 million shares respectively, and NetEase, Inc, KE Holdings Inc. and JD.com rose to the first, second and third largest positions respectively.

Jinglin assets said that the portfolio takes full account of the impact of current relevant domestic and international events, and tends to choose companies with excellent fundamental texture, and the profits of excellent companies will continue to grow 2-3 years from now.

The darkest hour is over?

The risk is rising, the opportunity is falling out.

Has China's Internet technology stocks reached their cheapest moment after a ferocious sell-off? Have new opportunities for the future come?

In fact, looking back on this round of sharp decline in China's Internet technology stocks, the trigger is the domestic anti-monopoly regulatory policy on the Internet, superimposing the valuation bubble of technology stocks, and since 2022, a series of negative factors, such as the Fed's interest rate hike, the situation in Russia and Ukraine, and the warning of delisting of Chinese companies listed in the United States by US regulators, have accelerated the sell-off of Chinese Internet technology stocks.

Take the Hang Seng Technology Index as an example. Compared with the high in January 2021, the cumulative decline of the index has been more than 63% by May 16, halving it. The total market value of 30 constituent stocks has lost more than HK $13.6 trillion, which cannot be said to be tragic.

Standing at the current point, the policy risks faced by China's Internet technology stocks have been greatly released. First of all, the Financial Stability and Development Committee of the State Council set the tone: with regard to the economic governance of the platform, the relevant departments should improve the established plan in accordance with the principles of marketization, the rule of law, and internationalization, persist in striving for progress in stability, and steadily promote and complete the rectification and reform of large platform companies as soon as possible through standardized, transparent and predictable supervision. the red light and green light should be set up to promote the steady and healthy development of the platform economy and improve international competitiveness.

Negotiations on the audit draft of the US PCAOB have been going on, and the Financial Committee of the State Council also pointed out that at present, Chinese and US regulators have maintained good communication, have made positive progress, and are working to form a concrete cooperation plan, and the Chinese government continues to support all kinds of enterprises to list overseas.

Obviously, there are positive signals at the regulatory level, and the most stringent regulatory time is over.

Going back to the valuation level, Hong Kong's Hang Seng Technology Index is already in the lowest valuation area since its inception. Take Tencent as an example. By the close of trading on May 16, Tencent's PE (TTM) had fallen to 12.23 times, the lowest valuation in a decade, or even the lowest water level since Tencent's listing.

Objectively speaking, after this round of regulatory storm, the development environment of China's new economy will enter a healthy growth, and after China's new economic giants adapt to supervision, their business performance will probably return to growth. Take the technology companies in the United States as an example, the regulatory policy in the United States has always been very strict. After adapting to the regulatory pace, most of the operating performance of the technology Internet giants in the United States have returned to positive growth.

To sum up, the current time point, high probability is the best time to invest in China's science and technology Internet industry, we can use ultra-low prices to obtain a large number of China's most competitive core assets.