Baidu as Chinese Alphabet counterpart and how COVID-19 created a policy environment
Today we will talk about tech company Baidu Inc (NASDAQ:BIDU) a Chinese counterpart to the traditional Alphabet or Google search.
Baidu inc is a leader as a search engine and internet provider in China, also one of the biggest in the world, Robin Li is managing the company’s business for 17 years as a CEO.
Baidu Inc is the largest internet company in China and Baidu is the 4th most popular website visits daily in the World on Alexa, providing services for 90% of internet users in China roughly over 700 million and the number of total active users globally counted at 1.3 billion in 2020.
Baidu inc using cutting-edge big data solutions like Artificial Intelligence (AI) and Machine Learning (ML), also takes part in one of the largest programs of self-driving cars worldwide, partnering with huge companies like Ford, Intel, Grab, and Honda to provide AI technology.
Since December 2020, there has been very strong growth in securities right after an official statement that Baidu started Autonomous Driving Car production and (NASDAQ:BIDU) stock doubled over one quarter due to the law signed on the 1st December 2020, by US ex-President Donald Trump regulating the rules of publicity to foreign countries on the US Stock Exchange.
Fundamental analysis of the Baidu Inc stocks (NASDAQ:BIDU) of those Chinese companies under attack on raising tensions between China and USA over the Big Data domination, that comes from three sources:
1. US Security and Exchange Commission (SEC) prepares rules for toughening up auditing standards for foreign companies. So for Chinese companies which will not participate in data sharing and privacy policies of SEC, specifically if a foreign company whose financial statements do not meet requirements will be de-listing from the US Stock Exchange.
These changes in US standards will affect all foreign companies, starting with the largest Chinese tech companies such as Baidu Inc (BIDU:NASDAQ), Alibaba Group (BABA:NYSE), JD.Com Inc (JD:NASDAQ), Tencent respectively, there is a risk of de-listing the securities of these companies on the American Stock Exchange, being one of the key sources of financing for these companies.
2. The common situation in international markets, namely the COVID-19 pandemic, which started in China and they were the ones who first recovered, and we are talking about the economy.
Meanwhile, in USA, Europe, and other developing countries was a gigantic decline in industrial production, when in China at that time powerful economic growth took place unlocking the full potential of the current monetary policy.
China is the first country to financialy recover from the COVID-19 pandemic and, looking at the emerging macroeconomic indicators since the summer of 2020, they came out much better than expected. China became the first major economy to fully recover in terms of GDP to above pre-crisis levels.
Monetary authorities of China, namely the Peoples Bank of China (PBC), all central banks during the economic recovery naturally pursued a stimulating monetary policy, the PBC slowly begins to remove monetary stimuli, which is naturally negative for the Chinese stock market.
At the same time, China is widely implementing Central bank digital currency (CBDC) and actively pushing the emergence of digital currency electronic payment (DCEP) like all the other huge, medium-size, and emerging economies, measured by the size of economic performance.
3. Last week, the United States of America, the United Kingdom, the European Union, and Canada imposed sanctions on Chinese officials who are involved in the violation of the rights of the Uighurs, according to foreign deputies from Western countries. Uighurs are a minority of Muslims who live in China’s western province of Sin-Jiang.
US, EU, UK, and Canada claim local Chinese officials are setting up Xinjiang internment camps that are used as cheap slave labor producing cotton. The main point of the camps is to cure any kind of extremist behavior and help to fulfill the love of Communism.
In recent months, the Chinese authorities have taken actions aimed at limiting the influence of large US technology companies on public life in China and on the Chinese economy in general.
Suffice it to recall the absence of the CEO of Alibaba whose investors were worried about the disappearance of the founder of Jack Ma for a period of several months from October 24, 2020.
The fact is that that the Communist Party of China took over the Chinese large technology companies, not so long ago the Alibaba was obliged to sell all its media assets, and Tencent Chairman Pony Ma Huateng also had similar kinds of problems during last years.
That shows a squeeze situation being hardly pushed from USA by improving auditing standards and dependent on the local, Chinese government where you have the only marketplace.
While trading on the Hong Kong Stock Exchange Hang Seng (HSI), Baidu inc implemented a Secondary Public share Offering (SPO) last week, which turned out to be a flop, with demand for shares far below expectations
Baidu and other Chinese companies are heavily funded by US investors trading publicly for years on the American Stock Exchange (BIDU:NASDAQ)
These three events of high importance for Chinese tech companies alongside with a setteled classical Head-and-Sholders-pattern on a technical daily chart of Baidu Stock price that shows 50% profit on downside potential and that is without leverage.
Given this market situation, as well as the news, a clear head and shoulders pattern has formed on the intraday chart of Baidu stock price.
Baidu’s upcoming move Trading Idea is Short Sell the stock with a profit target of $107 (BIDU:NASDAQ).
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