Chinese internet stocks were on the move in January, with many seeing their share prices decline, although Tencent bucked the trend
Short interest in Tencent surge during the month of January, rising by 85% month over month, and that wasn’t the only Chinese internet stock to see a big change. Baidu also saw a significant change, as short interest in its stock plunged by 24% in January.
Tencent short interest skyrockets, Baidu’s falls
In a report dated Feb. 17, Barclays analysts Alicia Yap, Joyce Zhou and Gregory Zhao say they think the reason short interest in Tencent climbed so much month over month was because of the meaningful increase in its share price. Here’s a look at the short interest ratio. (All graphs in this article are courtesy Barclays.)
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Tencent’s stock price climbed 17.3% month over month, and they note that investors are probably worried that the company’s stock is priced for perfection.
Another concern investors may have is the decision to include U.S. ADR stocks in the MSCI, which could impact Tencent shares. As of this writing, shares of Tencent are down by 0.76% at HK$129.80 per share.
Baidu, BitAuto, Jingdong see changing short interest
Shares of Baidu saw a 4% decline in price month over month, and short interest fell during January.
The Barclays team thinks the reason Baidu stock rose during the month is because investors might have begun covering their short position to beat a potential short squeeze if the Chinese search engine giant posted solid results for the fourth quarter. Of course the company did end up seeing a significant increase in revenue, although shares fell in the wake of that earnings report.
Another stock that saw a huge change in short interest was BitAuto. The company’s shares dipped by 15% month over month, while short interest sky rocketed, climbing 76% during the month of January.
The Barclays team thinks the reason for this is because investors began to worry about earnings per share dilution and the possibility of an earnings revision after the Jingdong and Tencent investment.
In relation to that investment, short interest in Jingdong plunged, falling 36% in January as its share price climbed 7.3%. The Barclays team attributes that to changing sentiment as investors turn negative on the company after Alibaba’s disappointing earnings results.
Here’s a look at the change in the short interest ratios in some of the top stocks in Barclays’ Asia (excluding Japan) internet coverage universe.
Interestingly, short interest in NQ Mobile, a popular short position since Muddy Waters presented its short thesis on the company, has remained fairly stable over the last month, although it has been declining steadily in recent months.
China internet stocks outperform the NASDAQ
The Barclays team also points out that the China Internet sector outperformed the NASDAQ for the month of January. The stocks saw an average share price decline of 1.3% month over month at the end of January, compared to the NASDAQ’s 2.1% price decline. They report that 17 of the 29 stocks they monitor in the sector saw significant declines in their share price.
NQ Mobile stock plunged 12.3%, while Alibaba shares fell 14.3% and Weibo stock slumped 12.6%. Tencent was a big outperformer in January, as shares climbed 17.3%.