Why PDD Holdings Shares Soared Today

Actions of PDD Holdings (PDD 10.17%)the parent of Pinduoduo and Temu, were among Chinese stocks that gained today in response to an emergency rate cut that is expected to provide a much-needed boost to the Chinese and companies like PDD.

As a result, the stock was up 9.8% at 11:36 a.m. ET.

Image source: Getty Images.

Is China back?

Chinese shares rose today after the central bank made its most aggressive efforts to stimulate the economy since the pandemic.

The People’s Bank of China (PBOC) said it would cut reserve requirements, the amount of cash banks must hold, by 50 basis points, freeing up about $142 billion in new loans.

The PBOC also said it would cut interest rates, including on mortgages, to encourage borrowing and spending.

The move should provide a tailwind to the Chinese economy, particularly the consumer sector, where PDD competes.

Despite the weak economy, PDD has seen strong growth, showing that its social commerce model allows it to continue to take market share from competitors such as JD.com and Alibaba Groupbut the stock fell in its recent earnings report after it indicated that sales growth had slowed.

What’s next for PDD

Chinese stocks tend to move in unison, especially in response to macroeconomic data and events, so it’s no surprise to see PDD gain on the news.

Based on its strong growth rate and affordable valuation, PDD continues to look like one of the most attractive Chinese stocks. It currently trades at a price-to-earnings ratio of just 12. If the Chinese economy can return to full strength, the stock could be a big winner.