Nasdaq Golden Dragon Index declines 46% as China stocks retreat

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Nasdaq Golden Dragon Index declines 46% as China stocks retreat

 Nasdaq Golden Dragon Index declines 46% as China stocks retreat
Image source: Worawee Meepian,Shutterstock

Highlights

  • The Nasdaq Golden Dragon China Index has 98 firms based on market capitalization.
  • The index fell nearly 46% in the last six months and 19% in one year.
  • JD.com, Didi Global, and Baidu were among the Chinese stocks in focus on Tuesday.

Chinese stocks have been retreating in the past few months as Beijing tightened the corporate rules over many issues. Besides, the recent crackdowns on Didi Global, TAL Education, and the Alibaba Group have raised major concerns in the investing community. Furthermore, the Alibaba Group was ordered to pay a record US$2.8 billion fine over alleged rules violations.

These developments have kept investors away from the Chinese stocks fearing losses due to the government's regulatory pressure on these companies. As a result, after witnessing some traction in May and June, the US-listed Chinese stocks withdrew in the past two months.

What is Nasdaq Golden Dragon China Index?

The Nasdaq Golden Dragon China Index has 98 companies whose common stocks are traded publicly in the US, but a significant part of their businesses is in the Asian country. These firms are selected in the index based on a modified market capitalization weightage measure. 

The consumer services sector constitutes the highest number of companies in the index at 41%, followed by consumer goods and technology with 24% and 18%, respectively. The rest of the sectors include financial, industrial, healthcare, oil and gas, and basic materials.

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Source – pixabay

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How did the index perform?

The index fell nearly 46% in the last six months to close at 10343.53 on Aug 23, 2021. The decline shows the downward trend of Chinese stocks in the US. The index's purpose is to provide insights into the economic opportunities in China, including the selected companies.

The index has constantly been declining since June 29, 2021. It fell nearly 19% in one year.

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Trending Chinese stocks

Here we explore three Chinese stocks that were trending on Wall Street Tuesday.

JD.com, Inc. (NASDAQ: JD) 

The JD.com stock was trading at US$74.41, up 13.21%, at 1:32 pm ET.

This Chinese e-commerce company has a market capitalization of US$116.39 billion. Its P/E ratio is 21.7, and the forward P/E ratio for one year is 63.20.


JD.com declared its second-quarter results on Monday. In the quarter ended June 30, its revenue was US$39.3 billion, and net income attributable to ordinary shareholders was US$123 million or US$0.08 per ADS diluted. JD’s active customer accounts increased to 531.9 million in one year ended June 30, 2021, against 417.4 million in the same period ended June 30, 2020.

The company had 320,000 employees at the end of the June quarter.

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DiDi Global Inc. (NYSE: DIDI) 


The DiDi stock was trading at US$8.639, up 11.90%, at 1:50 pm ET on Aug 24. The company ran into trouble with the government over cybersecurity rules and other issues before the US IPO.

The mobility technology platform provider has a market capitalization of US$41.38 billion.

On Tuesday, the stock witnessed a significant rally in intraday trading for no apparent reason.

Since its US listing in June, the stock fell around 45%.

It is currently trading near its 52-week lowest price of US$7.16. Its 52-week highest price was US$18.01. On Aug 23, the trading volume was 26,666,080.

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Source – pixabay

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Baidu, Inc. (NASDAQ: BIDU) 


The BIDU stock was trading at US$154.86, up 8.48%, at 2:07 pm ET. The Chinese search engine company has a market capitalization of US$53.79 billion. Its P/E ratio is 8.06, and the forward P/E one year ratio is 24.16. But the company does not pay dividends.

Baidu’s total revenue in the second quarter was US$4.86 billion. Its net loss attributable to the company was US$90 million or US$0.26 per ADS diluted for the quarter.

The stock witnessed saw huge investor interest on Tuesday after its announcement that Xiaodu Technology has closed the Series B financing at a US$5.1 billion valuation.

The stock’s highest and lowest prices in the last 52 weeks were US$354.82 and US$116.41, respectively. The share volume was 6,556,904 on Aug 23, 2021.

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Bottom line

Although the Chinese stocks have growth potential, the government crackdown on the Chinese firms has kept investors away from the stocks. However, the stocks are expected to bounce back after the regulatory pressures subside. As such, investors must analyze all the facts before making an investment decision. 

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