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Why Are Chinese Internet Stocks Gaining Today?

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Shares of several major Chinese internet companies--including Alibaba (BABA), JD.com (JD), and Tencent (TCEHY)--surged in early morning trading Tuesday after a better-than-expected earnings report underscored the strength of the budding industry.
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Shares of several major Chinese internet companies—including Alibaba BABA, JD.com JD, and Tencent TCEHY—surged in early morning trading Tuesday after a better-than-expected earnings report underscored the strength of the budding industry.

Baozun BZUN, a smaller firm that helps Western brands like Nike NKE and Starbucks SBUX adapt their e-commerce strategies for China, posted its latest quarterly financial results on Tuesday morning. Total revenues reached $241 million, up about 23% from the year-ago period. Non-GAAP net income skyrocketed 128% to $24.7 million.

The digital solutions company also noted that services revenues climbed 56% on a year-over-year basis. Baozun shares surged 20% to touch an all-time intraday high of $43.94 in early trading Tuesday.

BZUN helped lift other Chinese internet stocks because of its tight-knit relationships with the industry’s major players. Alibaba is the company’s biggest investor, while JD.com is considered a close business partner.

Baozun’s health also proves the strength of China’s internet marketplace. If its clients—including Nike, Starbucks, Coach COH, and Fiat Chrysler FCAU—are finding value in developing online sales strategies specifically for the country, it probably spells good news for other businesses in the space.

Chinese internet stocks are also rising on the back of reports that the nation’s regulators are working on a plan to allow foreign-listed tech giants to trade on domestic exchanges. Companies like Alibaba, Tencent, and Baidu originally listed on foreign exchanges in an attempt to gain international recognition back when Beijing heavily regulated outsiders’ exposure to Chinese A-shares.

According to a recent report from The Wall Street Journal, the world’s most-populous nation is now considering a structure that would allow investors to buy and sell shares of these companies indirectly.

The KraneShares CSI China Internet Fund KWEB gained more than 1% in morning trading Tuesday and is now up more than 3% since the WSJ’s story.

Want more market analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!

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JD.com, Inc. (JD) : Free Stock Analysis Report
 
Alibaba Group Holding Limited (BABA) : Free Stock Analysis Report
 
Tencent Holding Ltd. (TCEHY) : Free Stock Analysis Report
 
Baozun Inc. (BZUN) : Free Stock Analysis Report
 
Fiat Chrysler Automobiles N.V. (FCAU) : Free Stock Analysis Report
 
Starbucks Corporation (SBUX) : Free Stock Analysis Report
 
NIKE, Inc. (NKE) : Free Stock Analysis Report
 
KRANS-C CHN INT (KWEB): ETF Research Reports
 
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