A report by JianBank International said the covered Chinese internet companies posted mostly better-than-expected second-quarter profits, although revenues were only in line with or below expectations. The only exception is the American conglomerate (03690.HK), whose revenue and profit both exceeded expectations. The bank observed that earnings growth for most companies slowed due to macro uncertainty and low consumer confidence. On the other hand, the following factors drive continued improvement in profitability, including continued cost optimization and efficiency improvements; revenue structure changes; and an improved competitive landscape.

With the exception of PDD.US, most companies place greater emphasis on achieving shareholder returns in the form of share buybacks and/or dividends. The bank expects the upward trend in profitability to continue for the remainder of the year, enabling Internet companies to continue to return to shareholders.

Jianbin International pointed out that the current valuation of the Chinese internet industry is attractive, but no immediate catalyst is seen in the absence of a clear and broad recovery trend in consumption and economic activity. Given Tencent's (00700.HK) solid fundamentals, sustainable profit growth and the huge transformational potential of the WeChat ecosystem, Tencent is its sure-fire choice.

Jianbin International is also looking good on the likes of Merit and Takei (09961.HK), which are benefiting from structural trends in service consumption. While e-commerce will remain the most hotly contested segment, Alibaba believes there are trading opportunities due to Alibaba's (09988.HK) attractive valuation and the potential inflow of funds from inclusion in Hong Kong shares from September 10.