JPMorgan sees a rebound ahead

As Covid-19 cases decline in major Chinese cities and consumption in the country is expected to rebound in the weeks ahead, JPMorgan names four e-commerce stocks set to benefit as growth returns to a more normalized level. “We believe we will see a rebound in consumption in late 2Q22 or 3Q22, when the total ecommerce market growth should return to a more normalized level,” JPMorgan analysts said. “We recommend investors accumulate selectively in the ecommerce space in 2Q22 on relative resilience during the lockdowns and pace of recovery in 2H22,” they said in a note on May 16. E-commerce stocks that rely less on discretionary spending are set to outperform first, according to the investment bank. It expects that recovery in consumption demand will be led by consumer staples that are now seeing strong demand and being “suppressed by disruption in logistics.” These are JPMorgan’s Chinese e-commerce stock picks for the three to six months ahead, in order of preference: Alibaba Pinduoduo JD.com Vipshop JPMorgan has an “overweight” rating on both Alibaba and Pinduoduo, which means the bank sees the stocks outperforming the average total return of stocks in the analysts’ scope of coverage. JD and Vipshop have been given a “neutral” rating, meaning they’re expected to perform in line with the average total return of stocks covered by the analysts. The stock preferences were based on three criteria: category mix, valuation and source for margin improvement. Still, the analysts warned that e-commerce players can expect to see fewer near-term benefits this time than in 2020. That’s because of factors such as an environment of weaker consumption and the emergence of new challengers such as Kuaishou , Douyin and Weixin, whose ecosystems were “still in the early stage back in 2020.” Consumption in China has struggled for months as the mainland grapples with its most severe Covid outbreak since early 2020. Data released last week painted a grim picture for consumption in the country, with April retail sales dropping 11.1% from a year ago — a larger decline than the 6.1% fall predicted in a Reuters poll.

Beauty blogger Austin Li Jiaqi applies lipstick during a livestream on the e-commerce platform Taobao on Oct. 26, 2018 in Shanghai, China.

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As Covid-19 cases decline in major Chinese cities and consumption in the country is expected to rebound in the weeks ahead, JPMorgan names four e-commerce stocks set to benefit as growth returns to a more normalized level.

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