While China’s property development giants find their footing amid the ongoing real estate slump, several analysts have their sights on housing transaction and services platform KE Holdings . Listed in the U.S. under the ticker “BEKE,” the company is known in Mandarin Chinese as Beike and operates the Lianjia platform popular with apartment renters in major Chinese cities. The stock also trades in Hong Kong. KE Holdings’ U.S.-traded shares are up 38% in 2024. In contrast, an index of Chinese property stocks in Hong Kong has gained just under 3% for the year after a volatile three weeks. “We expect BEKE’s existing and new homes transactions to benefit from recent government support measures in 2025,” Jefferies analysts said in an Oct. 7 note. They also noted how the company has tapped business opportunities in renovations, home rentals and connecting consumers to home contractors. Jefferies rates the stock a buy, with a price target of $30. That suggests upside of nearly 34% from Friday’s close of $22.41. “We expect BEKE to capture the long-term value in brokerage services on existing and new homes in China,” the Jefferies report said. Chinese President Xi Jinping in late September led a meeting that pledged to ” halt the real estate market decline and spur a stable recovery,” the readout said in Chinese, translated by CNBC. The high-level announcement came two days after the People’s Bank of China promised to cut rates for existing mortgage holders and extend prior real estate support policies. Four major Chinese cities, including Beijing, eased home purchase restrictions late last month, just as the country was headed into a week-long holiday. Industry data indicate real estate transactions in major cities surged during the holiday versus a year ago, and will likely keep up a similar pace in coming weeks. But China’s giant property developers now face a market that’s very different from the one they saw in their heyday. It’s a shift from relying on pre-sales of unfinished apartments , to tackling a market with existing, older inventory — and an aging population. “While the holiday data suggests some improvement in new home sales, we believe the recovery of China’s property market will be prolonged, even with potential fiscal support,” Richard Tang, China strategist and head of research Hong Kong, Julius Baer, said in an email. “As such, we recommend investors take advantage of market strength to reduce exposure to property and related stocks,” Tang said. He did not name specific stocks. Bank of America Securities analysts said in an Oct. 9 note they hosted a call with an “expert from a large property agency chain” who predicted home prices would fall by another 10% before stabilizing. The expert also cautioned that he doesn’t see a fundamental change in home buyers’ expectations, meaning it remains to be seen whether high transaction volumes would persist, the report said. About half of the expert’s stores are connected to KE Holdings’ platform, and he noted the company has “very high market share” in most existing and new home brokerage channels in China, the Bank of America report said. BofA Securities raised its price target to $24, up from $21, while maintaining a neutral rating over concerns about sustainable growth. In the near term, a stock market change could also be a catalyst for the stock. Goldman Sachs analysts said in an Oct. 1 note that KE’s Hong Kong-listed shares could soon become eligible for inclusion in the connect program that allows investors in mainland China to buy stocks listed in Hong Kong. They also “see Beike as a clear beneficiary of recent policy easing, especially considering that the 4 tier-1 cities combined contribute to 40-50% of Beike’s existing home [gross transaction volume] by our estimate.” Even before the latest policy easing, the Goldman analysts pointed out that the average transaction price for existing homes on Beike fell by only 1% in September from the prior month, less than the 3% month-on-month drop between July and August. “The company held US$10.5bn net cash as of Jun 2024 and is committed to 6-7% shareholder return yield p.a. via share buybacks and dividend,” the analysts said. “We see risk-reward as skewed to the upside and are Buy-rated with attractive valuation relative to historical levels and its profit growth outlook.” Goldman has a price target of 54 Hong Kong dollars ($6.95) and $21 for the company’s U.S.-listed shares. — CNBC’s Michael Bloom contributed to this report.
Check out the companies making headlines before the bell. Cisco Systems — The networking technology stock added nearly 2% on the heels of a Citi upgrade to buy from neutral. Citi said artificial intelligence can become a bigger part of the business over time. Novocure — Shares soared roughly 22% after the U.S. Food and Drug Administration approved Novocure’s Optune Lua wearable treatment for metastatic non-small cell lung cancer. Morgan Stanley — Shares gained more than 3% after the bank reported quarterly results before the bell that beat Wall Street’s forecasts, helped by higher-than-expected revenue from its wealth management, trading and investment banking operations. The firm’s earnings came in at $1.88 per share, versus the $1.58 expected by a LSEG analyst poll. Revenue was $15.38 billion versus the $14.41 billion consensus estimate. United Airlines — Shares rose about 1% after the airline beat earnings and revenue expectations for the third quarter. United also announced a $1.5 billion share buyback, its first since before the pandemic. ASML — Shares of the Dutch chip equipment firm slid 4% before the bell, adding to Tuesday’s losses after it accidently released its third-quarter results a day early . The report was disappointing as ASML cut its 2025 sales forecast, suggesting weakness in markets other than those that serve AI applications. J.B Hunt Transport Services — Shares jumped more than 7% after the company’s third-quarter results topped expectations. J.B. Hunt posted $1.49 earnings per share on $3.07 billion of revenue. Analysts polled by LSEG had forecast earnings of $1.41 per share on $3.02 billion of revenue. The company said demand for its intermodal service rose throughout the quarter. — CNBC’s Sean Conlon, Alex Harring, Sarah Min, Michelle Fox and Hakyung Kim contributed reporting.
Ted Pick, CEO Morgan Stanley, speaking on CNBC’s Squawk Box at the World Economic Forum Annual Meeting in Davos, Switzerland on Jan. 18th, 2024.
Adam Galici | CNBC
Morgan Stanley topped analysts’ estimates for third quarter profit as its wealth management, trading and investment banking operations generated more revenue than expected.
Here’s what the company reported:
Earnings:$1.88 a share vs $1.58 LSEG estimate
Revenue: $15.38 billion vs. $14.41 billion estimate
Morgan Stanley had several tailwinds in its favor. The bank’s massive wealth management business was helped by high stock market values in the quarter, which inflates the management fees the bank collects.
Investment banking has rebounded after a dismal 2023, a trend that may continue as easing rates will encourage more financing and merger activity.
Finally, its Wall Street rivals have posted better-than-expected trading results, making it unlikely that the firm missed out on elevated activity.
Chinese e-commerce company Alibaba has invested heavily in its fast-growing international business as growth slows for its China-focused Taobao and Tmall business.
Nurphoto | Nurphoto | Getty Images
BEIJING — Chinese e-commerce giant Alibaba‘s international arm on Wednesday launched an updated version of its artificial intelligence-powered translation tool that, it says, is better than products offered by Google, DeepL and ChatGPT.
Alibaba’s fast-growing international unit released the AI translation product as an update to one unveiled about a year ago, which it says already has 500,000 merchant users. Sellers based in one country can use the translation tool to create product pages in the language of the target market.
The new version is based only on large language models, allowing it to draw on contextual clues such as culture or industry-specific terms, Kaifu Zhang, vice president of Alibaba International Digital Commerce Group and head of the business’ artificial intelligence initiative, told CNBC in an interview Tuesday.
“The idea is that we want this AI tool to help the bottom line of the merchants, because if the merchants are doing well, the platform will be doing well,” he said.
Large language models power artificial intelligence applications such as OpenAI’s ChatGPT, which can also translate text. The models, trained on massive amounts of data, can generate humanlike responses to user prompts.
Alibaba’s translation tool is based on its own model called Qwen. The product supports 15 languages: Arabic, Chinese, Dutch, English, French, German, Italian, Japanese, Korean, Polish, Portuguese, Russian, Spanish, Turkish and Ukrainian.
Zhang said he expects “substantial demand” for the tool from Europe and the Americas. He also expects emerging markets to be a significant area of use.
When users of Alibaba.com — a site for suppliers to sell to businesses — are categorized by country, developing countries account for about half of the top 20 active AI tool users, Zhang said.
Chinese companies have increasingly looked abroad for growth opportunities, especially e-commerce merchants. PDD Holdings‘ Temu, fast fashion seller Shein and ByteDance’s TikTok are among the recent global market entrants. Many China-based merchants also sell on Amazon.com.
Zhang declined to share how much the updated version would cost. He said it was included in some service bundles for merchants wanting simple exposure to overseas users.
His thinking is that contextual translation makes it much more likely that consumers decide to buy. He shared an example in which a colloquial Chinese description for a slipper would have turned off English-speaking consumers if it was only translated literally, without getting at the implied meaning.
“The updated translation engine is going to make Double 11 a better experience for consumers because of more authentic expression,” Zhang said, in reference to the Alibaba-led shopping festival that centers on Nov. 11 each year.
Alibaba’s international business includes platforms such as AliExpress and Lazada, which primarily targets Southeast Asia. The international unit reported sales growth of 32% to $4.03 billion in the quarter ended June from a year ago.
That’s in contrast to a 1% year-on-year drop in sales to $15.6 billion for Alibaba’s main Taobao and Tmall e-commerce business, which has focused on China.
Nomura analysts expect that Alibaba’s international revenue slowed slightly to 29% year-on-year growth in the quarter ended September, while operating losses narrowed, according to an Oct. 10 report. Alibaba has yet to announce when it will release quarterly earnings.