Last week, China’s central bank cut interest rates by a mere 10 basis points. Besides Turkey, it is the only country to slash rates. This gave China tech investors enough momentum to send Alibaba (BABA) and JD.com (JD) higher from the recent $80 and sub-$30 lows, respectively.
The two retail firms are at risk of profit-taking. They depend on buying momentum to form an uptrend. Sellers previously showed a willingness to sell shares quickly. Kingsoft Cloud (KC), an infrastructure tech firm in China, could fall the fastest.
Investors who hold PDD Holdings (PDD), a retailer, or the gaming firm Tencent (TCEHY) should watch out. If Alibaba’s momentum fades, it could fall. JD, still cheap after gaining around $10 a share, may fall back to the low $30s. Investors tended to build a bigger position in the $30 to $35 range.
In the near term, improving relations between China and the U.S. will delay the stock fade. Still, beware of a post-news sell-off after US Secretary of State Antony Blinken visits China on June 18-19, 2023.
