"Big Banks" JP Morgan: The volatility of internet stocks reflects weak market sentiment, and adjustments bring investment opportunities

JP Morgan's research report indicates that internet stocks recently experienced significant volatility due to reports suggesting that Tencent (00700.HK) may see its value-added tax rate increase from the current 6% to the 32% consumption tax level applicable to liquor companies. Although the bank believes this statement confuses value-added tax with consumption tax and references the 32% consumption tax rate seems odd, the initial market reaction shows that market sentiment is quite fragile after several days of risk aversion. Several news media outlets refuted the related reports before the market closed.

The bank views this adjustment as an opportunity to buy Tencent and related internet stocks such as NetEase (09999.HK) and Baidu (09888.HK). It reaffirms a constructive outlook on the MSCI China Index overall, with fundamental, optimistic, and pessimistic targets of 100, 120, and 80 points, respectively, by the end of 2026. Additionally, the bank assigns an "overweight" rating to the communications services sector and believes that the sector's performance in the fourth quarter of last year could meet market expectations