Roughly a week after the People’s Bank of China announced a surprise 50-basis-point rate cut, the rally in beaten-down Chinese stock was continuing today.
Momentum from last week’s gains, fear of missing out on the rebound, and a surge in Chinese indexes during China’s trading session lifted Dada Nexus (NASDAQ: DADA), though an early morning pop faded over the course of the trading session.
As of 11:52 a.m. ET, Dada Nexus stock was up 5% on the news after gaining as much as 15.5% earlier in the session.
Image source: Getty Images.
Today’s gains came as traders set positions before a weeklong holiday beginning tomorrow, and seem to be a continued response to last week’s encouraging stimulus package.
The Shanghai Composite jumped 8.1% during Monday’s session, and other Chinese indexes had their best single-day performance since 2008.
Also fueling the rally was news that China’s central bank would tell banks to lower mortgage rates on existing home loans, a move designed to help the long-suffering property market in China.
Dada Nexus specializes in on-demand retail and delivery and works closely with JD.com, which owns a majority stake in the company.
There hasn’t been much company-specific news on Dada Nexus over the last week, but JD.com shares have soared as investors are optimistic that China’s biggest online retailer will reignite its growth now that Beijing is being more accommodating.
JD.com, on the other hand, earned a price-target raise from $41 to $52 from Citigroup and has a buy rating on the stock.
China has long been an unpredictable market for investors, and the recent rebound seems to fit with that pattern, as it’s unclear how much of an impact the stimulus package will have.
Having some exposure to China could pay off, but investors should maintain a diversified portfolio if they want to invest there, as the economy is still weak and U.S. chip export restrictions could put further pressure on China. In other words, there’s still a lot of risk in China stocks.
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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JD.com. The Motley Fool has a disclosure policy.
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