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Why These 3 Chinese Internet Stocks Are Soaring Today

By Rich Smith – Updated Jun 17, 2020 at 3:59PM

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Bad news from China on the coronavirus might be good news for these tech stocks.

What happened

Chinese tech stocks took off like a rocket Wednesday, and as of 3 p.m. EDT today, shares of new IPO Dada Nexus (DADA 2.16%), e-commerce facilitator Baozun (BZUN 7.17%), and social media company JOYY (YY 3.59%) were up 12.5%, 10.5%, and 14.5%, respectively. 

So what

The past few days have not brought good news for China's economy, as COVID-19 appears to be making a resurgence in one of the most tightly regulated (and, one might think, safest) corners of the country: Beijing.

Three colorful arrows racing straight up on a black background

Image source: Getty Images.

A total of 137 new coronavirus infections have been recorded in Beijing since Thursday, including 31 new cases reported Tuesday. In response, the Chinese government has canceled 60% of flights into and out of the capital, shut down its schools as well as some businesses, and even quarantined entire neighborhoods in an attempt to stop this outbreak early. Reuters reports that some are beginning to worry that the entire city is headed for a lockdown.  

And the virus could be spreading. In addition to Beijing, Reuters says, new cases have been reported in the provinces of Hebei, Liaoning, Sichuan, and Zhejiang, all tracing back to the Xinfadi wholesale foods market in the capital.

Now what

This is obviously not good news for China, which in weeks past had boasted it had essentially beaten the coronavirus, and was progressing in its plans to reopen its economy. A bump in that road, however, could help companies like Dada Nexus, Baozun, and JOYY.

In theory at least, a renewed shutdown of the economy would boost sales of groceries ordered online and delivered to customers, which is Dada Nexus' business. The company, which had its IPO at $16 a share just a couple of weeks ago, quickly shot higher, then slumped into "broken IPO" range. Now, it is back above its IPO price at $19.20 this afternoon on coronavirus worries.

Also likely to benefit from a potential shutdown of the economy are Baozun, the Chinese Shopify, which helps other companies market and deliver their products through e-commerce. And a social media site like JOYY is tailor-made to benefit from millions of people stuck at home with nothing else to do but surf the internet.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Baozun and Shopify. The Motley Fool has a disclosure policy.

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Stocks Mentioned

YY Stock Quote
$26.00 (3.59%) $0.90
Baozun Stock Quote
$6.28 (7.17%) $0.42
Dada Nexus Limited Stock Quote
Dada Nexus Limited
$4.73 (2.16%) $0.10
Shopify Inc. Stock Quote
Shopify Inc.
$26.94 (0.64%) $0.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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