What happened
Several Chinese stocks rose today as more Chinese companies reported solid earnings results despite COVID-19 lockdowns that threaten to hurt economic growth in the country.
Shares of the large e-commerce firm JD.com (JD 2.08%) are trading more than 6% higher as of 12:22 p.m. ET today. Shares of the question-and-answer content website Zhihu (ZH 5.17%) are trading nearly 18% higher, while shares of the tutoring company TAL Education Group (TAL 2.01%) are trading nearly 11% higher.
So what
Earlier this morning, the large Chinese e-commerce company Alibaba (BABA 2.59%) reported adjusted earnings per American Depositary Share equivalent to $1.25 for the quarter ending in March on total revenue of roughly $32.2 billion. Both numbers beat analyst estimates.
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Alibaba also hit its goal of providing service to more than 1 billion consumers and said that despite the impact of rising COVID cases in China, the company expects to generate strong operating cash flow this year. The results of Alibaba seem to be helping most Chinese stocks trading on U.S. exchanges today.
Zhihu also reported earnings results yesterday, delivering earnings per American Depositary Share equivalent to -$0.16, which slightly missed estimates. Revenue equivalent to roughly $117.2 million beat estimates.
Zhihu's revenues grew more than 55% year over year (YOY), and the company maintained its gross margin of 45% despite the challenging economic backdrop. The company also further diversified its revenue.
JD.com also pleased investors last week when the company beat revenue estimates, despite growing revenue in the quarter by only 18% YOY, the slowest YOY revenue growth the company has ever experienced.
The Chinese government also held an impromptu nationwide media video conference yesterday to discuss the country's economy and how it plans to support it.
"The difficulties, in some areas and to a certain degree, are even greater than the severe shock of the pandemic in 2020," Premier Li Keqiang said during the conference, according to CNBC.
Goldman Sachs analysts yesterday wrote in a research note that "Chinese policymakers are in greater urgency to support the economy after the very weak activity growth in April, anemic recovery month-to-date in May, and continued increases in unemployment rates."
Now what
The Chinese government would like China to achieve 5.5% gross domestic product growth this year, which is looking increasingly difficult, as COVID lockdowns have started to really cut into growth.
Most analysts have already significantly cut their GDP expectations for China's economy this year, largely due to the intense lockdowns in China.
But some of these tech companies, like JD.com, Zhihu, and TAL, may end up being OK. While it's early, Chinese tech stocks have demonstrated resilience through the first three months of the year at least, although most of them are removing guidance for the rest of the year.
Additionally, JD.com is down more than 27% over the last year, while Zhihu and TAL are both down roughly 82% and nearly 90%, respectively. The Chinese government is now pledging support to Chinese tech stocks and also saying that it plans to ease up from a regulatory standpoint, so some of the selling on certain Chinese stocks may be overdone at this point, despite COVID concerns.
