It's a good day for the broad market, but Wednesday is proving to be a great day for several Chinese stocks. Shares of consumer-facing Alibaba Group (BABA 0.59%) are higher to the tune of 3.8% as of 12:30 p.m. ET today, while PDD Holdings (PDD 2.80%) stock -- the company formerly known as Pinduoduo -- is up 4.1% in that time frame.
Just don't look for any company-specific reasons for this pronounced strength. You won't find it. Wednesday's prod for sweeping bullishness among China's top e-commerce tickers is rooted in much broader news. That's China's surprisingly strong recovery of the nation's consumer spending.
China's economy isn't so bad off after all
China's National Bureau of Statistics unveiled encouraging data Wednesday morning, indicating the country's industrial production grew 4.6% last month. That's better than the 4.4% economists were anticipating, and up from September's pace of 4.5%.
The highlight, however, is October's retail spending. China's consumers upped their outlays by 7.6% last month versus expectations of only 7%, accelerating September's growth pace of 5.5%. Indeed, last month marks the third consecutive month spending growth has sped up, while industrial productivity growth has accelerated in two of those three months.
It's a much-needed sign that China's economy is on a firmer footing than has been recently feared.
Beijing arguably enforced COVID-19 lockdowns for too long, refusing to lift these heavy-handed measures until late last year. By then, however, a great deal of economic damage -- including to future growth prospects -- had been feared done. Following the second quarter's sequential GDP growth of only 0.8%, many economists dialed back their longer-term growth expectations for China's economy. For instance, the World Bank lowered its 2024 growth outlook for China from 4.8% to only 4.4%.
Based on October's retail spending and industrial production data, China may be in better shape than recently believed.
But are Alibaba and PDD worth buying?
One month's worth of data isn't a trend. China's economic data has been unexpectedly strong for a few months now, however. Investors would be wise to take that detail and these numbers' growth trajectory at face value, and recognize the market is underestimating its budding economic rebound.
Ditto for its aforementioned e-commerce stocks like Alibaba and PDD. Neither of these tickers have been red-hot performers of late, with Alibaba shares seemingly still losing ground despite China's improving economic backdrop. Savvy investors might want to take a shot in either name before more investors start connecting these dots.
