Index situation: in the second week of May, Hang Seng technology index rose slightly, with a weekly increase of 0.07%. On May 11, the U.S. Bureau of Labor Statistics announced that the U.S. CPI soared by 8.3% in April compared with the same period last year, which once again raised concerns about the possible response measures taken by the Federal Reserve. On May 13, Fed chairman Powell reiterated that it was reasonable to raise interest rates by 50 basis points at the next two meetings, and did not actively consider the possibility of a single interest rate increase of 75 basis points, which was better than market expectations. Affected by the above factors, the Hang Seng technology index fell first and then rose. The NASDAQ Internet Index fell 2.80% in the second week of May, which was larger than the Hang Seng technology index, mainly due to the large decline of the Hang Seng technology index last week and the rebound this week.
In terms of individual stocks, Internet stocks fluctuated: the three stocks with the largest gains were Kwai, JD health and Alibaba health. The three stocks with the largest declines were JD health, Zhihu and Alibaba. As of May 13, 2022, the pe-ttm of Hang Seng technology index is 32.30x, which is at the 7.45% quantile since the establishment of Hang Seng technology index.
Capital flow: meituan and Tencent are the top 2 net capital inflows to the south. Among the constituent stocks of Hang Seng technology index, the top five companies with net inflow of southbound funds are meituan-w, Tencent holdings, ideal automobile-w, Kwai and Xiaopeng automobile-w. The top five companies with non southward net capital inflows are JD group SW, shangtang-w, Haier Smart Home Co.Ltd(600690) , Kingdee International and Byd Company Limited(002594) electronics.
Key news of Internet sector:
Industry trends: 1) 11 Chinese stock companies have been listed in the “pre delisting list”; 2) The special rectification of Internet financial risks was successfully completed; 3) In 2022q1, the market value of China’s listed Internet enterprises decreased by 20.2% month on month.
Company news: 1) Tencent: apex hero mobile game was launched globally on May 17; 2) JD: launch new department store; 3) Alibaba: hungry? Launch “all-around supermarket”, focusing on local supermarket business; 4) Meituan: set up a large pharmacy company in Tianjin; 5) Kwai: the e-commerce strategy has added “fast brand”; 6) Others: Tiktok raised the local living Commission, and station B launched a PC client.
Investment suggestions: focus on Netease, Tencent and meituan
The valuation of the Internet sector is at a historically low level. Affected by the epidemic, the first and second quarters were the bottom of the performance of advertising, e-commerce and other industries. It is expected that the fundamentals will begin to improve in the third quarter. In terms of policies, since the beginning of 2022, the warm wind of policies in the Internet sector has been blowing frequently, and the market sentiment is slowly repairing: combined with the meeting of the Political Bureau of the CPC Central Committee on April 29, we believe that the supervision or recovery of the Internet industry will be guided by “supporting healthy development” in the future. Combining the two major factors of fundamentals and emotions, Netease, which has solid performance support and is about to launch the big products Diablo: immortality and Harry Potter international service, is recommended in May; Recommend Tencent holdings, a high-quality leader with high-quality business model, strong barriers and low valuation; And meituan with low valuation and greater upward flexibility.
Risk tips: policy risk, the risk that the financial report performance is lower than expected, the risk that the competition pattern of the short video industry deteriorates, the risk that the growth rate of the advertising market is lower than expected due to the macroeconomic downturn, the risk that the new products of game companies cannot be launched on schedule or the performance is lower than expected, etc.
