JD.com led losses Tuesday following the reports of its subsidy campaign, which is aimed specifically at competing against budget shopping app Pinduoduo. The stock plunged the most in four months.

“Embarking on an aggressive subsidy campaign could be an acknowledgment on JD.com’s part that it is facing market share pressure from Pinduoduo,” said Ling at Union Bancaire Privee. The offensives to lure cost-sensitive consumers also suggest internet leaders’ superiority in elements such as logistics aren’t proving enough to thwart competition from newer entrants and smaller players. 

The glory days of Tencent’s domestic games business may be a thing of the past. Gaming was once the engine of Tencent’s earnings growth. While 2023 looks to be a better year for the Chinese gaming sector, we believe there has been a structural shift in the market. We expect Tencent’s domestic gaming sales to remain broadly flat through 2024-26. 
 

Eoin Treacy's view

China’s tech companies grew out of a cauldron of creativity and copycat operations. The result is that while some companies have been more successful than others, they are all still aggressively chasing market share.

Tencent is a mobile games company it is also a social media venue, payments app, ride hailing, and advertising business too. Alibaba is an ecommerce business but also has significant payments and investments in ride hailing and food delivery. JD.com is an ecommerce business, Pinduoduo is also an ecommerce business but focuses on smaller cities. Meituan is a social media, reviews and food delivery company.

They all compete with one another for market share with Alibaba and Tencent owning pieces of several smaller companies. This kind of competition is expensive.
The shares have a high degree of commonality and all are now unwinding their post lockdown surge which was a lot shorter-lived than that seen among US tech companies. That’s a direct product of the Chinese administration’s reticence to flood the market with liquidity or to send direct payments to consumers. Instead, the government is currently attempting to rein in healthcare spending through reforms no one is happy about. 

Clear upward dynamics will be required to check momentum and suggests higher reaction lows have been found.