According to the Daiwa report, most of the mainland internet stocks covered by the bank have risen by three to five percent since the stimulus measures were announced. Based on discussions with investors, the bank determines that there are still multiple rounds of upward market movement, as seen in various clear signs, including fear of missing out (FOMO) trading and a eagerness to reduce underweight positions in Chinese stocks. Although most investors believe that substantial policy implementation is needed to rationalize a long-term market reversal, the bank believes the process may take several months, expecting investors to act swiftly to avoid being too late.

Daiwa believes that many global long-term investors are eager to reduce their underweight positions in China, with internet stocks being a focal point. The bank recently pointed out that pressured value stocks have quickly rebounded to three-year average levels, abandoning the widespread consensus of underweighting Chinese stocks and leading to a shift in funds towards high beta stocks. However, compared to the 5-year average PE, Alibaba (09988.HK) (BABA.US) is still 0.6 standard deviations below, Tencent (00700.HK) is 1 standard deviation below, JD.com (09618.HK) (JD.US), baidu (09888.HK) (BIDU.US), and Netease (09999.HK) (NTES.US) are 1.2, 1.5, and 1.6 standard deviations below.

The bank does not rule out market consolidation in the coming days, as many stocks have become overbought in a short period of time. The bank also believes that many long-term investors may not have time to react and are waiting for better entry points. The bank recommends buying Tencent, Trip.com (09961.HK) (TCOM.US), Meituan (03690.HK), Alibaba, and PDD Holdings (PDD.US) on market pullbacks.