Why JD.com, PDD Holdings, and Baidu Stocks All Fell Double Digits in January

China stocks got hit hard last month as a combination of weak economic data, interventions by the Chinese government against selling stocks, and ongoing regulatory concerns pushed the sector down broadly.

Among the losers were JD.com (NASDAQ:JD), PDD Holdings (NASDAQ:PDD), and Baidu (NASDAQ:BIDU), which finished the month down 22%, 13.3%, and 11.6%, according to data from S&P Global Market Intelligence. The iShares MSCI China ETF (NASDAQ:MCHI) finished the month down 10.3%, showing China stocks fell broadly.

Here's how each stock performed last month.

JD data by YCharts

China stocks continue to struggle

Chinese stocks started off the month on the wrong foot as China reported GDP growth of just 5.2% for 2023. While that would be a good pace for any country, it marked China's slowest yearly growth in 30 years, and its GDP growth slowed to just 4.1% in the fourth quarter. It's expected to remain around that pace in 2024.

Investors also seemed spooked that Beijing told some investors not to sell Chinese stock amid a rotation among some money managers from China to Japan. Later in the month, a court ordered the liquidation of China Evergrande Group, once the country's biggest real estate developer. That was the latest sign of weakness in China's real estate sector.

Those news items all pressured China stocks further, while JD, PDD, and Baidu faced their own challenges.

JD.com was the worst performer of the past three months even though there was little company-specific news out on the stock. JD shares fell sharply through 2023 as the company posted near-flat growth for much of the year. It has lost market share to PDD Holdings' Pinduoduo, which has been growing rapidly through its social commerce model, which offers discounted prices for group buyers.

Back in December, founder Richard Liu urged the company to be more competitive and acknowledged that JD.com was big, bloated, and inefficient. The remarks echoed a similar call to action from Alibaba founder Jack Ma.

PDD Holdings, meanwhile, was able to brush off the broader weakness in China for the first half of the month but sank toward the end of January.

That weakness seemed to relate to analyst comments that the boom from its Temu e-commerce app in international markets could be peaking. The success of Temu helped drive PDD's revenue up 94% in the third quarter, though that growth is likely to decelerate soon, since it's difficult for any retailer to double sales each quarter, especially a company that's approaching a run rate of $40 billion in revenue.

Finally, Baidu's stock fell in the middle of the month after an article came out linking its Ernie AI platform to military research, which could spark a response from the U.S. government, which has already tightened restrictions over what chips can be exported to China.

Baidu, which is China's search leader, denied the report, but that did little to help spark a recovery in the stock.

Image source: Getty Images.

Will China stocks recover?

At this point, there seems to be little reason to expect a recovery in the China tech sector. Apple just reported a sales decline in China, offering further evidence of the weak economy. While PDD has been a winner thanks to its rapid growth, the outlook for the economy in general looks challenging.

If you're looking for a Chinese stock, PDD seems to make the most sense of the bunch here, given its rapid growth. Baidu's AI chatbot also seems promising, but investors may want to tread cautiously in the sector, as the economic malaise in China seems likely to continue.

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Jeremy Bowman has positions in JD.com. The Motley Fool has positions in and recommends Apple, Baidu, and JD.com. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.