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author|yang zhichao

editor | wilderness

on august 14, tencent released its second-quarter financial report, with profits soaring by 82%. however, on the second trading day, tencent's stock price fell by 1.44%.

this is a common situation for concept stocks in 2024: increasing the stock price is more difficult than doubling profits. if the performance is good, it will drop slightly, but if the performance is bad, it will fall off a cliff. in order to maintain the stability of stock prices and protect the interests of shareholders, first-tier chinese concept stocks represented by tencent have initiated large-scale buybacks far exceeding those in previous years.

but starting from september 24, the logic of chinese concept stocks changed. tencent has experienced continuous surges, and the china concept internet etf has surged 10% in one day. alibaba, meituan, nio, xiaomi... it seems that as long as they are chinese assets, they are all "good goods", even pink single stocks like luckin and "high-quality companies like faraday future whose bosses are not in china" "everyone has experienced a surge.

no one can predict the outcome of this surge. but at least for now, investors in chinese concept stocks who have been stuck for a long time can temporarily switch from "icu" to "ktv".

01 the top concept: buying back has become bargain hunting

at the end of 2023, tencent experienced a plunge, once plunging 12% in one day. at the beginning of this year, tencent’s stock price fell to 258 yuan. tencent is usually regarded as a bellwether for chinese concept stocks. during the same period, chinese concept stocks including alibaba, jd.com, meituan and other internet companies, as well as automobile and consumer stocks, performed poorly. the china concept internet etf fell to its peak of four. less than one percent.

the era of buybacks has begun. in march this year, tencent announced that it plans to repurchase more than hk$100 billion in shares in 2024. since 2024, tencent's total repurchase has exceeded hk$80 billion, while last year, tencent only repurchased hk$49.4 billion. in addition to tencent, alibaba, kuaishou, and jd.com have also started buybacks. alibaba has invested a total of us$12.5 billion in share buybacks in fiscal year 2024.

chart: tencent holdings’ repurchase amount in recent years (unit: hk$100 million)

the purpose of buybacks is, of course, to stabilize the stock price and give back to shareholders. butwith the surge in chinese concept stocks since september 24, the intensive repurchase of chinese concept stocks has another meaning: bargain hunting.

if you pay attention to tencent's stock price for a long time, it is not difficult to find that tencent's stock price has risen extremely "stuck". even after the release of the second quarter financial report with excellent performance, tencent's stock price still fell by about 1%. from august to september 24, tencent’s stock price rose more than 2% in only two trading days.

from a longer perspective, from the beginning of may to september 23, tencent’s stock price changed very little, and the overall stock price remained sideways. at the beginning of this month, goldman sachs issued a research report saying: tencent is still one of the most visible and sustainable profit compound growth potential companies among china's internet giants. it maintains a buy rating and a 12-month target price of hk$464.

however, tencent's stock price was only 370 yuan at that time. according to its turtle-like fluctuation speed in the past few months, it would not reach that level without rising for a year and a half.

but the stock market is like this. the energy accumulated in a year is often released in a day or two.

continuous economic policy releases have completely ignited the market's enthusiasm. on september 24, the china internet etf surged 10% in one day - no need to give an example.as long as it is a well-known chinese concept stock, it is almost impossible to find one that has not soared.tencent, the chinese concept stock with the highest market value, took the lead in rising by 3.77%, and then rose by another 6% after one trading day. in just three days, the target price of hk$464 predicted by goldman sachs is no longer so unattainable, and tencent's stock price has reached 437.

if the market's popularity is supplemented by some positive performance, then this surge will be doubled in power.

such as jd.com. after the release of the second quarter financial report, jd.com's stock price experienced a 4% surge. the already excellent performance was amplified by market sentiment. on september 24, jd.com's us stock price rose by 13.91%, and again rose by 14.39% on the 26th. superimposed on the news of interoperability with taobao, jd.com surged 4% again before the market opened on the 27th.

in the first half of this year, jd.com spent us$3.3 billion to repurchase 7.1% of its shares. as the stock price rose, it also became a "bottom hunter."

"backing the dip" means that a large number of existing investors enjoy the appreciation of their equity, but the company spends relatively little cash. the share of equity used as employee incentives was also obtained by tencent and jd.com at the lowest cost.

of course, at the same time, there are also investors who are worried that the skyrocketing stock price will increase the company's repurchase costs, and whether this will cause leading companies such as tencent to reduce their repurchases. some value investors seem to be more concerned about short-term stock price fluctuations than short-term stock price fluctuations. care about the company's long-term feedback to shareholders.

02 waist: after coming out of icu, go directly to ktv

tencent has a big business, and a little rise or fall cannot affect its fate. however, for those chinese concept stock companies whose stock prices have reached single digits, the surge is timely. moreover, due to the previous plunge, the surge of these companies it came more violently. ——just like a patient who had been lying in the icu for a long time, not only was he allowed to be transferred out, but he also walked into the ktv to sing a song that day, and even ordered a girl.

the most representative ones are: weilai and iqiyi.if douyu was the worst-known chinese concept stock in the past two years, then this year, these two companies are strong players competing for this throne.

due to continuous losses and the market's pessimism about new energy vehicles, nio's stock price continued to fall. by august this year, nio’s stock price had fallen by 54% during the year.

for growth companies like weilai, the rise and fall of stock prices is not only a matter of shareholder return, but also related to the company's fate - financing.

in the second quarter, nio’s net cash was 20.5 billion yuan, and its adjusted net loss was 4.535 billion yuan. nio's cash troubles have been going on for a long time, and it has also gone through several additional issuances. the sluggish stock price will seriously affect its financing ability in the secondary market.

the surge in chinese assets has provided nio with timely help. from the current point of view, it has also successfully received the "tremendous wealth", rising by 11% in one day on september 24. nio itself is also doing its best. in the second quarter, its financial report revenue increased significantly and its losses decreased. the release of letao brought new positive market sentiments. the combination of various advantages made nio's return rate extremely amazing in the past month.

——if you buy nio shares at the beginning of the month, investors' current income will reach a terrifying 40%. nio shareholders can go to a better ktv and order more expensive beer than tencent shareholders. from an operational perspective, if weilai raises funds by issuing additional shares in the secondary market at this time, it should be much easier than before.

iqiyi’s surge is equally astonishing.

after the second-quarter financial report was released on august 22, iqiyi’s stock price plummeted 15% in one day, and fell another 10% on the second trading day. in just two months after july, the parent video giant’s share price halved, even falling below $2.

but on september 24, iqiyi’s us stock price soared 14% in one day. although there was a correction on september 25, it continued to rise by 15.52% on september 26, and continued to rise by more than 5% before the market opened on the 27th.

so how to increase the price by 30% as quickly as possible? the answer is of course to drop 50% first.

in fact, compared with short-term sentiment, the previous low stock prices of nio and iqiyi may be the root cause of the surge.neither weilai nor iqiyi are garbage companies. the former has solid brand power and unique battery swap advantages, while the latter has 100 million paying users, strong content production capabilities and copyright resources. the previous stock prices, even the purchase price before privatization, were somewhat too far away from the actual value of the two companies.

03 the madness of speculators

in contrast, the rise in stock prices of some chinese concept stocks is like pie in the sky.

after big companies have raised their prices to "very expensive" prices,various types of capital are no longer able to buy the best chinese concept stocks at better prices, so they have begun to target sub-prime assets. several representative companies are: xunlei, zhihu, and luckin coffee.

this type of company previously had a characteristic: its trading volume was extremely meager, and it was basically a "penny stock." a slightly larger hotel can go long or short on its stock price based on a day's turnover.

for example, zhihu is a famous "penny stock" in hong kong stocks. taking september 23 as an example, the trading volume of zhihu’s hong kong stocks was only 3,700 shares, with a turnover of hk$31,300. in the face of zhihu’s trading volume, poor students with student loans have the opportunity to become soros for a day.

although ruixing coffee has excellent business performance, it is currently in the pink single market that lacks liquidity - that is, the pink single stocks sold by jordan in "the wolf of wall street". more importantly, ruixing also it has a serious record of financial fraud, so it has not been favored by investors for a long time. taking september 5, the lowest day in recent times, as an example, the transaction volume of luckin pink sheets was only 7.8 million us dollars, and the turnover rate was only 0.13%. when soros’s threshold is a bit higher, but for a market with a population of 1.4 billion, for a leading coffee company, this transaction volume is still considered very small.

in normal times, they are "inferior assets" that capital looks down upon, but with the offshore rmb rising above 7, as long as they are exposed to china, they have become good assets.

zhihu’s trading volume has soared dozens of times. on september 24, zhihu’s hong kong stock trading volume reached 388,700, and its stock price surged 4.69%. on september 27, the transaction volume reached 2.72 million, and the stock price rose 0.89%.

luckin coffee's trading volume doubled on september 24. however, as a "cheap" pink single stock, luckin's stock price rose "only" 5%, which is far less than those star companies. but soon, the dividends of the leading companies flowed downwards and were caught by luckin. on september 27, ruixing’s stock price surged 15.43%, and its transaction volume reached 213 million, which was ten times the usual scale.

there is a saying that luckin, which has committed financial fraud, currently has high-quality performance as support, and its performance in the competition with cudi exceeded expectations. but faraday future, which has been slow to deliver its cars, has also surged. this can only be explained by the madness of capital.

as a stock with too strong a negative label, faraday future did not enjoy the dividends of chinese assets in the first few days. but soon, faraday future also experienced a surge of 9.65% on september 26, and continued to rise by 3.65% before the market opened on the second trading day. it is worth mentioning that faraday future’s total share capital is only 12.38 million, but its daily trading volume can exceed 25 million. obviously, the money here is more speculative.

in an era of labor shortage, being older is not a hindrance. even old companies in the pc internet era can play the role of growth stocks in these days.

on september 24, xunlei’s trading volume surged nearly three times month-on-month, and its stock price rose 5%. it rose another 5% the next day. in the second quarter, xunlei’s revenue fell by 23.72% year-on-year, and its net profit was nearly halved year-on-year. but in the face of the madness of capital, the decline in performance can be concealed.

even sohu rose 4.13% on september 24. this old internet company gradually lost its imagination after selling sogou. it has also been in trouble of losses in recent quarters. at present, its main value and the income has become sohu changyou.

in the craziest era of japan's economy, even graduates from ordinary universities were desperately scrambled by recruiters. during the period of skyrocketing chinese assets, every chinese asset has become a high-quality asset. however, the crazy rise has also caused investors to worry. is this the beginning of the bull market for chinese concept stocks, or is it a short-term return to glory?

04 the valuation of chinese concept stocks is still low

the stock market is a voting machine in the short term, but it will eventually become a weighing machine.

in the past two months, chinese concept stocks have released intensive second-quarter financial reports. at least for the leading companies, strong is a very appropriate adjective.

the e-commerce industry reversed the consumption cycle and achieved gmv growth again on 6.18. alibaba achieved net revenue growth, jd.com’s net profit recovered, and pinduoduo has not lost its growth magic.

in the game industry, the market continues to recover. tencent has made super hit mobile games such as "dungeon fighter", "honor of kings" and "westward journey" are still strong, not to mention the game "black myth: wukong" historical product.

content platforms, kuaishou and bilibili’s advertising revenue are still rising sharply, and their profit structure is getting healthier. for long videos, although iqiyi has fallen into short-term fluctuations, the profit margin is getting higher and higher.

in terms of consumer electronics, xiaomi still released its best second-quarter report despite huge losses in its automobile business. consumption in the pc and smartphone markets has recovered significantly. the overall situation of the new energy vehicle industry is a bit worse, but jikrypton and xiaomi still provide good gross profit margins.

at least from the perspective of leading chinese concept stocks, their operating data is not that bad.

in fact, there is a broad consensus among international investment institutions that the price of chinese concept stocks is relatively low. there are also a large number of institutions that use real money to purchase chinese concept stocks to "buy the dip."

in the first quarter of this year, singapore’s sovereign wealth fund temasek fund established a position of more than 1.5 million shares of the kraneshares china overseas internet etf. as of the quarter, temasek already held 9.2 million shares of alibaba, 301,400 shares of beigene and 3.6 million shares of beigene. shares in jd.com.

during the same period, bank of america bought 5.18 million shares of jd.com, with a market value of us$180 million; bought 2.91 million shares of pinduoduo, with a market value of us$474 million; and bought 5.86 million shares of alibaba, with a market value of us$715 million. dollar.

in addition, goldman sachs, bank of montreal, and hedge fund appaloosa have all increased their positions in chinese concept stocks on a large scale.

at present, although chinese concept stocks have experienced a surge, they have only "returned to the starting point" to a certain extent.for example, after li auto surged 30% in one month, its stock price still only returned to the may price. as a company on a rapid growth track, its pe (ttm) is still only 18.55 times.

at the same time, the chinese concept stock etf has only returned to the level of the same period last year - out of the icu, but not yet entered ktv, which may be more in line with the current situation of chinese concept stocks. of course, some investors may have already taken their money and rushed to the club.