Yahoo Finance’s Brian Sozzi, Myles Udland, and Julie Hyman discuss the surge in Chinese tech stocks.

Video Transcript

MYLES UDLAND: All right, let's switch gears here and talk about results out of China, and just talk about the setup for Chinese stocks. Pinduoduo out with its latest quarterly results in the morning, and the company coming out with its first ever net profit. And we see here revenues for the company coming in slightly light of expectations.

And an interesting announcement here, Julie. When I saw the way that Bloomberg's story on Pinduoduo's results, bring the quarter, the headline is that Pinduoduo pledges a billion and a 1/2 of its profits to Chinese farmers. And really, of course, this is showing the way that regulatory, either actions, veiled threats, concern about future actions, from Chinese-based companies that are listed in the US, Pinduoduo being one of them, that these businesses are trying to stave off the threat of regulatory actions by saying, we are committed to investing in the Chinese economy. And Pinduoduo shares here up about 11% before the open.

JULIE HYMAN: Yeah, I mean, we're seeing a broad gain in Chinese shares. So, Pinduoduo definitely participating in that. But probably this what seems like from an outside perspective to be a political gesture, probably a positive for the company as well. This company, e-commerce company, but it does a grocery buying and delivery as well. So, that presumably is the line that you trace from their business to agriculture.

And the company, even though that revenue number missed, you saw strength elsewhere, including in that net income number and the fact that it was that first profit by the company. Active buyers at 849.9 million in the year ended in June. It is bigger than the active customer consumers at Alibaba's China retail marketplace. So, that's something interesting to keep in mind as well.

And as we talk about the China stocks and the rebound that we've been seeing over the past couple of days, Pinduoduo not hurting things here. JD.com, which reported before the open here yesterday, but Chinese shares didn't have a chance to react until overnight yesterday. So, now, we saw strength there, and then continued strength into the US session today. Tencent doing a buyback.

So, overall, seeing some more positive sentiment coming out there. The events on the ground don't seem to have changed, right? It's not like China has pulled back on the recent regulation. It rather seems to be that maybe investors are becoming a little bit more comfortable with it. And of course, Brian Sozzi, one of those investors now is Cathie Wood. It looks like she's getting back into those China stocks after pulling back.

BRIAN SOZZI: Yeah, Cathie Wood, tough year for her, but she continues to plow forward, and continues to show how much weight she does have in the market, becoming a little more aggressive, what, on JD. That news hit after the company report earnings.

But just looking at the Yahoo Finance trending ticker page right now, it's JD, a lot of these Chinese focused names are dominating that page right now. JD.com, Didi, Baidu, Tencent, as you mentioned, announcing new stock buyback plan. All those companies are really some top trending names on the platform right now.

But to your point, Julie, really nothing has changed. I think essentially what you're seeing today here with these names is just an oversold rally. The market really has sold off, justifiably, in Chinese stocks over the past month or so. And now, you're seeing these companies reports of earnings, which I would think are backward looking.

And I would argue that moving forward, nothing has changed. I mean, the fundamental set up for these China stocks is concerning, I would say, Myles. It remains as concerning today as it was yesterday, and the week before, and the week before that.

MYLES UDLAND: Yeah, I think the argument that I have seen, and just in terms of the setup for Chinese stocks, right, is, I'm going through the China screen that I've built here on Yahoo Finance. It's not comprehensive, right? But I mean, there are-- the bulk of these names are off more than 40%. JD.com is 40% off its 52-week high.

I forget. I mean, Baidu is down 60%. Pinduoduo is down 60%. Bipshop is off 70%. Alibaba down 50%. So on and so forth, right?

And I think there's just been this idea-- and we saw the Hang Seng enter a bear market last week-- there's just been this idea that at a certain point, Chinese government is not going to abide a continued crash in all of these stocks. So, whether that means they're going to be buying them, whether that means they're signaling to these businesses, you know, here's something you can say that is positive, or just you go with the idea of, these stocks are not going to go to zero across the board. Forget about zero, they're not going to go down 90% across the board in an embarrassment, really, to the Chinese government.

And I think that is sort of the, I'll jump on that, I'll take a chance at that falling knife just believing that there has to be some level of support here, not just institutionally, but governmentally for these stocks down 50% or 60% in really just a couple of months. And that Pinduoduo longer term chart you look at, I mean, that is about as ugly as it gets, right? And I think the overall embarrassment for the Chinese government and some of how this has been rolled out I think is probably undergirding some theses here for just, you know, why now is the time to come in and maybe buy some of these names.

And we see pretty much all of them bid pre-market. Pinduoduo the stand out. But again, Alibaba, Didi, Bipshop all up more than 4% pre-market. NetEase up 4% pre-market as well. JD's up almost 9% pre-market. So, again, certainly a lot in there, in terms of just the thesis for, Julie, why now is the time.

JULIE HYMAN: Right. And I think even just beyond the sort of valuation argument or that the Chinese government at some point is not going to allow the selling to continue is the argument that was made by Tiffany Hsiao of Artisan Partners. When we talked to her, I believe it was late last week, and she said, this is a maturation process of this sort of capitalist communist hybrid that we see in China. And she sort of said, this was something that if you are a close China watcher, you saw coming.

So, that was an interesting perspective to have as well. That her view was that, this isn't something that is going to imperil the underlying economic growth, both of the country, but also of these specific companies. So, just wanted-- I'm just reminded of that conversation as we watch these stocks bounce back this morning.