In "Major Banks," China International Capital Corporation: Chinese tech stocks should adopt a relatively defensive allocation strategy, with Tencent as the top choice

Bank of China International released a report on the Chinese internet industry, stating that artificial intelligence, macro environment, competitive landscape, regulatory policies, shareholder return execution, and China-U.S. relations will be the six key factors affecting the financial performance and valuation of Chinese internet listed companies in the next 6 to 12 months. In the current turbulent and volatile market environment, considering the third quarter performance preview, counter-cyclical core capabilities, and financial visibility (especially short-term profitability and shareholder return execution), the bank recommends adopting a relatively defensive asset allocation strategy. The bank's short-term priority ranking is: Tencent (00700.HK) > NetEase (09999.HK) > JOYY (JOYY.US) > Tencent Music (01698.HK).

In addition, the bank also recommends Bilibili-W (09626.HK) due to its expected significant revenue and earnings per share adjustment space in 2026 from "Three Kingdoms: Ncard." The bank anticipates that "Three Kingdoms: Ncard" will begin its first paid test on October 23, 2025, and will officially launch during the Lunar New Year in 2026, expected to bring significant revenue and profit contributions to the company in 2026.

Bank of China International expects Tencent's third quarter performance to be robust and exceed expectations; it is the best asset for long-term sustainable growth. The bank expects the company to once again exceed expectations in the third quarter, with total revenue growing 14% year-on-year, mainly driven by strong gaming and online advertising businesses, with adjusted operating profit reaching RMB 73 billion, a year-on-year increase of 20%. The bank believes that the company, through focused, continuous, and efficient operational execution, as well as ongoing investment in and integration of artificial intelligence into its WeChat ecosystem, which has advantages in data, user behavior, and technology, is continuously strengthening its core capabilities to effectively respond to macro and systemic headwinds. It maintains a preferred "Buy" rating and raises the target price to HKD 710.

The bank stated that Alibaba (09988.HK) has a firm AI strategy; it is paying attention to the dynamic changes in fast commerce and core e-commerce business during the Double Eleven period. The bank expects that due to robust industry demand and the continuous expansion of technological advantages, the cloud business will achieve accelerated growth in the quarter ending September this year and maintain strong growth momentum in the coming quarters. The bank believes that Alibaba's recent stock price trend will highly depend on the company's dynamic changes and performance in instant retail and China's core e-commerce sector during the Double Eleven promotion period, maintaining a "Buy" rating for Alibaba (BABA.US) with a target price of USD 170. (wl/U)