Why did the stock prices of JD.com, RLX Technology, and New Oriental Education soar today?

what happened

After a particularly tough session on U.S. exchanges on Monday, Chinese stocks rallied on Tuesday after fresh economic data from Beijing.

Shares of the e-commerce giant as of 12:21 p.m. ET JD.com (JD.com 1.99%) Trading up about 2.4%, shares of the vaping leader RLX Technology (RLX 11.50%) Up nearly 13%, private education company shares New Oriental Education Technology Group (educate 8.05%) It rose nearly 9.7%.

so what

Monday was one of the toughest days for Chinese stock market trading since the Great Depression. Hong Kong’s Hang Seng Index fell about 6.4%.

People looking at big stock charts.

Image credit: Getty Images.

Chinese President Xi Jinping granted himself a third five-year term as general secretary of the country’s ruling Communist Party, breaking the tradition of appointing party secretaries to a maximum of two terms. Xi Jinping has vigorously consolidated power during his tenure, and at his behest, Chinese lawmakers in 2018 removed constitutional restrictions enacted in 1982 that limited presidential terms to two terms. The move sets the stage for him to extend his rule at this month’s Chinese Communist Party congress, where he is largely certain to be reappointed for a third term in March 2023.

Xi Jinping’s policies have not always been welcomed by the investment community. His zero-coronavirus strategy for China has dampened economic activity in the country this year, while Xi Jinping has at times pushed for restrictive regulation of major Chinese tech companies.

However, some Chinese stocks rallied on Tuesday after Beijing reported a bigger-than-expected 3.9 percent growth in third-quarter gross domestic product (GDP). Manufacturing boosted the cause, as industrial output rose 6.3% year-on-year in September. This result was also much higher than expected.

But many investors remain concerned about China’s overall economic growth. Chinese leaders had forecast GDP growth of 5.5 percent this year, but many analysts expect the country to fall well below that level.

According to Reuters, Julian Evans-Pritchard of Capital Economics said: “China is unlikely to cancel its zero-coronavirus policy in the near future, and we do not expect any meaningful relaxation until 2024. “As such, recurring virus disruptions will continue to weigh on individual activities and further large-scale lockdowns cannot be ruled out.”

Although Xi Jinping has used regulators to crack down on big companies in China’s technology and real estate sectors, he said this year that he intends to ease the pressure. With his comments and fiscal stimulus, he’s been more supportive of the tech industry. In addition, Chinese officials have been working with U.S. financial regulators to resolve a long-standing audit dispute that threatens to delist hundreds of Chinese companies from U.S. stock exchanges.

How to do

Chinese stocks have fallen sharply this year, and given that China is such a huge market and the fastest-growing consumer market in the world, some stocks offer good opportunities for investors.

But the companies undoubtedly face some geopolitical headwinds — among them rising tensions between the U.S. and China, and the fact that foreign investors may be less willing to invest in the industry because of concerns about Xi Jinping.

I think Chinese stocks have potential, but given the potential for more volatility ahead, I’d prefer to stick with better-known names like JD.com, which has so far done better than its peers in terms of not causing public outrage. Regulatory Authority.

Bram Berkowitz has no positions in any of the stocks listed above. Motley Fool has a position on JD.com and recommends JD.com. The Motley Fool recommends New Oriental Education Technology Group. The Motley Fool has a disclosure policy.

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