Strategy Note /
China

Three opportunities brought by Archegos Capital's outburst

  • Tencent Music, iQIYI and Youdao have declined by 35%, 40% and 13% since March 23, respectively

  • Archegos Capital is the main reason for these stocks' dramatic downfalls

  • Potential high yield rewards and low risks come with precise timing to buy these stocks at low prices

Niko Yang
Niko Yang

Senior Analyst

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Ivan Platonov
Ivan Platonov

Research Manager

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EqualOcean
13 April 2021
Published byEqualOcean

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The event dragged the NASDAQ Golden Dragon China Index downwards by 9% on the first trading day after it occurred.

capital market

The recent market turmoil that saw slashed caps on media stocks such as Viacom (VIAC), Tencent Music (TME) and Baidu (BIDU) originated from Archegos Capital being forced to close positions in them. Among these names, Chinese concept stocks have suffered most, with TME down around 35% since March 23. We also saw iQIYI (IQ) down 40%, Youdao (DAO) down 13% and GSX Techedu (GSX) down 55%. Even though some of these companies didn't present a satisfactory growth trajectory in 4Q, most of them maintain solid fundamentals. We think that the valuations are dragged by the negative information and too dire. We also believe some of them are mispriced from various aspects of stocks. In this article, we will introduce some undervalued Chinese concept stocks.

TME: Consumers are embracing the paying model

Backed by Tencent, Tencent Music Entertainment Group (TME) was incorporated through the consolidation of QQ Music and China Music Corporation in 2016. It currently runs five of the most prevalent music apps in China as the leader of China's online music market. The company has a similar...

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