Alibaba, JD.com, NIO and Other China Stocks Rebound. Where They Go From Here. — Barrons.com

By Elsa Ohlen

U.S.-listed shares of Chinese companies looked set to jump Monday after heavy losses Friday as President Donald Trump softened his tone on China.

Trump posted on social media over the weekend that "it will all be fine, " after threatening further tariffs on China on Friday.

Alibaba's American depositary receipts rose 5.7% to $168.12, following a 8.5% decline in the previous session. Shares of Chinese tech companies Baidu and JD.com rose 4.1% and 3.5%, respectively, following steep losses for both on Friday. Electric vehicle maker NIO rose 4.6%.

The moves come after a selloff in Chinese stocks was triggered by Trump's Friday threat to impose an additional 100% tariff, on top of levies already in place, on all imports from China and restrictions on critical software. It followed Beijing on Thursday tightening export controls on products containing certain rare earth minerals.

U.S. markets were set to rally Monday after Trump dialed back his rhetoric over the weekend. "Don't worry about China, it will all be fine! Highly respected President Xi just had a bad moment," Trump wrote on social-media platform Truth Social Sunday.

Futures tracking the S&P 500 and Nasdaq rose 1.3% and 1.9%, respectively. The indexes closed 2.7% and 3.6% lower Friday.

If the U.S. and China can de-escalate the tensions that flared up last week, Alibaba and other Chinese tech names could quickly regain their lost ground and resume their recent rally.

"The key question for markets is whether these [tariffs] are ultimately implemented, with severe effects on global supply chains and especially high-tech production, or remain just efforts to gain negotiating leverage ahead of bilateral talks on the sidelines of the APEC meeting in South Korea late this month," Goldman Sachs analysts said.

The analysts, led by Jan Hatzius, see a temporary extension of the current tariff pause and minor concessions from both sides as being likely. However, they cautioned that the range of possible outcomes is wider than ahead of previous U.S.-China talks, including both the possibility of greater concessions and lower tariffs, or, on the flipside, "substantial new export restrictions and higher tariffs, at least temporarily."

Chinese tech names suffered Friday also in part due to investor concerns of an artificial-intelligence bubble, Barron's previously reported. Both the Bank of England and the International Monetary Fund warned last week of stretched equity valuations.

Despite Friday's drop, Alibaba U.S.-shares have gained nearly 88% so far this year coming into Monday trading, much due to optimism around its work on AI.

Write to Elsa Ohlen at elsa.ohlen@barrons.com

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