China Internet: Opportunity after KWEB’s ~30% drop from its Oct peak
Sector valuation, as measured by 86Research’s proxy basket, now stands at a distressed 15.4x. Over the past 3 years, there has been 5 KWEB drawdowns >20% and each peak-to-trough episode lasting 3-6 months, suggesting the current correction could be nearing its end. Several catalysts may also help stabilise sentiment including Trump’s visit to China, the upcoming Two Sessions (additional stimulus) and improving economics from China’s AI leaders. In this issue of 86TradeIdeas, the team highlights several quality names that could command significantly higher multiples in a normalised market, including Trip.com, Atour and DiDi, alongside Beike, which could benefit from further housing policy support. Kuaishou and Baidu offer differentiated exposure to key AI verticals. Despite near-term geopolitical uncertainty, they see compelling re-rating potential across these names in the coming months.
Edition: 231
- 06 March, 2026
China: Muted recovery, selective alpha
86Research expects 2026 to be a year of gradual recovery for China’s internet and new economy sector. While policy support should begin to emerge in 1H26, its impact on activity and earnings is likely to be felt mainly in 2H26. They model sector earnings growth of 10%, solid but well short of a cyclical boom. Valuations remain undemanding, leaving room for further re-rating as fundamentals improve. Against this backdrop, 86Research favours selective exposure to three structural tailwinds: easier global liquidity, scaling GenAI monetisation and accelerating overseas expansion. Their 2026 top picks - Alibaba, PDD, Baidu, Trip.com and DiDi Global - each offer differentiated exposure across growth, value and AI optionality.
Edition: 227
- 09 January, 2026
Industrials
Delisting - relisting + US$20bn lockup expiry = big mess. Didi is unlikely to be able to list in Hong Kong before mid-2022 (at the earliest) and even then it is not a given that HKEX will be very welcoming. Theoretically, it could go private, but this will not happen anywhere near the IPO price and so would not be well received. To make matters worse at the time of listing over 90% of Didi’s shareholders had entered into a 180-day lockup. The lock-up will expire on 26th December. On the subject of China ADR's delisting, Sumeet Singh believes it makes sense to go long the stocks that have already undertaken a HK listing while being short the ones that have yet to do so.
Edition: 125
- 10 December, 2021
Communications
Blood in the water - Richard Windsor explains why he believes the Chinese state intends to drive the value of the company to $0. Richard does not expect to see any let-up to the regulatory pressure now that government entities have invested $591m in rival firm Cao Cao Mobility. There is now a clear incentive to ensure that Didi goes out of business (it has already lost 30% of its user base and 50% of its opportunity since the crackdown began). Jean Liu is hoping that making an exit is going to save her company, but all the evidence points towards a far bleaker outcome.
Edition: 120
- 01 October, 2021
Risky Business: China’s Tech Crackdown & How to Navigate it
While the official ban on the most lucrative activities in the after-school tutoring sector marks a new low in the regulatory crackdown, RedTech maintain that China is not trying to strangle the golden goose. A handful of big losers will be offset by a majority of companies that are well positioned for growth in a tighter regulatory environment. The less risky (Tencent) are being dragged down with the more risky (Didi), creating lucrative, long-term investing opportunities. Other companies mentioned include Alibaba, Ant Group, ByteDance, Douyu, Huya, JD, Meituan, Pinduoduo, Sogou and TAL.
Edition: 116
- 06 August, 2021
Is China Building a Data ‘Great Wall’ or World Leading Digital Regulatory Framework?
Technology
While Didi’s treatment may have shocked investors, China is attempting to achieve in cybersecurity/data privacy what it did in 5G by setting the global standard to gain a first mover advantage and dominate the market. Sean Maher believes this would ultimately be bullish for mainland tech and believes a China over US internet valuation mean reversion trade is becoming attractive. Sean also covers internet deglobalisation, Chinese companies listing abroad and how recent events will have huge repercussions for VC exit strategies.
Edition: 115
- 23 July, 2021
Didi (DIDI)
Communications
Didi’s IPO comes fast on the heels of RedTech's May ride-hailing survey which found Didi to still be very dominant, but losing share, while ride-hailing usage was also in decline. Didi has been losing out to a rise in taxi usage and small gains for Meituan and other competitors since 2017. Since expansion in ride-hailing may be difficult due to the antitrust atmosphere in China, RedTech has also been looking at the potential of Didi’s grocery delivery business...
Edition: 113
- 25 June, 2021