China is making new efforts stimulate the economy.
Shares of PDD Holdings (PDD 10.13%), the parent of Pinduoduo and Temu, were among the Chinese stocks gaining today in response to an emergency rate cut that is expected to give a much-needed boost to the Chinese and companies like PDD.
As a result, the stock was up 9.8% as of 11:36 a.m. ET.
Image source: Getty Images.
Is China back?
Chinese stocks were up broadly today after its central bank made its most aggressive efforts to stimulate the economy since the pandemic.
The People’s Bank of China (PBOC) said it would lower reserve requirement ratios, the amount of cash that banks must hold, by 50 basis points, freeing up an estimated $142 billion for new loans.
The PBOC also said it would cut interest rates, including those for mortgages, to encourage borrowing and spending.
The move should provide a tailwind to the Chinese economy, especially the consumer sector, where PDD competes.
Despite the weak economy, PDD has been delivering strong growth, showing that its social commerce model enables it to continue taking market share from competitors like JD.com and Alibaba Group, but the stock plunged on its recent earnings report after it indicated that sales growth was slowing.
What’s next for PDD
Chinese stocks tend to move in unison, especially in response to macroeconomic data and events, so it’s not surprising to see PDD gaining on the news.
Based on its strong growth rate and affordable valuation, PDD continues to look like one of the more attractive Chinese stocks. It currently trades at a price-to-earnings ratio of just 12. If the Chinese economy can return to full strength, the stock could be a big winner.
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JD.com. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.