Huya (HUYA) and Douyu (DOYU) Multi-Baggers In the Making?

Today, the Chinese stock market experienced a resurgence following China's commitment to significantly stimulate the economy. Many investors have been waiting for this moment, as the government had previously exercised restraint in its approach to stimulus. However, the gradual and cautious measures taken thus far proved insufficient to ignite substantial economic growth, leading to a decline in investor enthusiasm. This is evident in the sustained sell-off that has persisted since the beginning of the year.

Though certain investors may have become disillusioned with Chinese stocks, there are those who continue to wait on the sidelines, prepared to invest once clear signs of recovery presents itself. Today's bullish performance could suggest that the second phase of the recovery has commenced (the first phase occurring between October 2022 and January 2023). However, caution lingers among investors due to previous occurrences of false rallies in Chinese stocks, which resulted in shattered hopes and subsequent collapses

Despite these concerns, there has been some progress. Notably, Chinese stocks have halted their descent to new lows. The next crucial step would be to achieve higher levels, with breaking the 1-year high being a satisfactory starting point, rather than aiming for all-time highs right away.

In the event that the bull market has indeed returned, we anticipate that China tech stocks would witness the most significant gains, primarily because they have been beaten down the most.

Apart from Alibaba and Tencent, Hang Seng Tech ETFs are expected to be a popular choice among many investors.

However, we believe that the American Depositary Receipts (ADRs) are even more undervalued and potentially offering higher rewards. One of the reasons is the lingering concern of delisting, which, in our view, has substantially diminished. This shift in perspective is due to the ongoing US audit, which has not revealed significant issues thus far, indicating that potential rectifications could satisfy audit requirements and avoid delisting.

Furthermore, there is a positive indication as the Chinese government has expressed its support for platform companies. Having passed the regulatory phase, these platforms are now encouraged to contribute to boosting the economy.

Considering these factors, we firmly believe that Huya (HUYA) and Douyu (DOYU), both listed in the US, present highly promising opportunities that merit consideration for investors who seek higher returns.