What happened
Shares of several Chinese stocks moved higher this week thanks to earnings results and new economic data from China.
Shares of the online education company New Oriental Education & Technology Group(NYSE: EDU) had surged nearly 17.4% this week as of 1:07 p.m. ET Thursday, according to data from S&P Global Market Intelligence.
Meanwhile, shares of the fintech company Jiayin Group(NASDAQ: JFIN) traded more than 17% higher, while another online education company, Gaotu Techedu(NYSE: GOTU), was up more than 7%.
So what
For its third fiscal quarter of 2023, which ended on February 28, New Oriental reported diluted adjusted earnings per American depositary share of $0.56 on total revenue of more than $754.1 million. Both numbers easily beat analyst estimates.
Image source: Getty Images.
"By the end of this fiscal quarter, the total number of schools and learning centers remained at 712. At the same time, our continued investment in maintaining the online-merge-offline teaching system has not only supported our high-quality services amid the pandemic, but also helped us enhance operational efficiency as businesses gradually recover," New Oriental's chief executive officer, Chenggang Zhou, said in a statement.
For the current quarter, the company is guiding for revenue between $801.8 million and $822.7 million, which amounts to an increase of between 53% and 57%.
There was also some positive economic data that definitely hinted at a recovering economy. This has been a big focus among investors after China's "zero-COVID" policies last year, including widespread lockdowns, significantly cut into economic growth.
Earlier in the week, new data showed that China's gross domestic product (GDP) grew 4.5% in the first quarter on a year-over-year basis. That made economists bullish on China hitting its 5% GDP growth target. Retail sales also grew 10.6% in March, well above estimates and rising at a faster clip than levels seen in the first two months of the year.
"The Chinese economy has clearly shaken off its COVID-related malaise and is settling into a trajectory of decent if unspectacular growth," Cornell University's Eswar Prasad said in a research note.
Still, not everything had bounced back just yet. China's ailing property market continued to struggle, with investment in real estate down 5.8% in the first quarter. Furthermore, younger workers in China are still struggling to get work. The unemployment rate for this group is close to 20%.
Now what
I think there are clearly green shoots in China's economy. And the sector certainly looks poised to have a better rest of the year than most other economies, although there's still a lot that can happen. We'll see what comes up as we get deeper into earnings season.
I tend to prefer larger Chinese stocks and companies that can withstand economic shocks or sudden regulatory pressure, which is why my preference in this group is New Oriental. It's not necessarily my favorite in the sector, but the earnings report did come in strong.
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