UBS Group released a report on Chinese network technology stocks, and investors have five common questions after the publication of the second quarter performance of the relevant companies this year. The first is the sustainability of profit margin improvement, the second is the cautious comments of PDD Holdings (PDD.US) on the industry impact (the bank's preliminary investigation shows that PDD's recent support measures for merchants should have limited financial and overall e-commerce industry impact), the third is the positioning of Alibaba-W (09988.HK) after inclusion in the Hong Kong Stock Connect (due to buybacks and the Hong Kong Stock Connect contributing 25% to 40% of Alibaba's average daily trading volume, the bank believes that strong fund inflows are a support), the fourth is the main risks apart from the macro economy (more concentrated market positioning, fundamental changes may lead to significant price volatility), and the fifth is the highlights, in addition to competition easing, better performance of online e-commerce compared to offline e-commerce.

Although the mainland macroeconomy is weak, the market holds a long-term consensus on the profitability resilience of Tencent (00700.HK) in key stock and potential catalyst debates. The main debate is the increase in valuation (PE of 15 times in 2024) and the high base in 2025. Investors also like the high growth of Meituan-W (03690.HK) in local services, with the potential increase in profit margin as competition eases with Douyin, and Ctrip's (TCOM.US) strong travel demand as a mid-term driver from Chinese consumers and international business growth.

UBS Group believes that Chinese network technology stocks have bottom-up driving force, visible earnings, and reasonable valuation. The bank's industry priority ranking is firstly Meituan-W (03690.HK) (earnings elasticity and visibility, as well as the potential for re-rating by 2025), secondly Alibaba (BABA.US) (acceleration of currency monetization in Taotian Group and narrowing losses in non-Taotian Group business), thirdly Ctrip (structural driving factors from flexible travel demand and strong international growth), fourthly Tencent, and fifthly New Oriental (EDU.US).