What Are BAT Stocks?

BAT is an acronym used to represent the stocks belonging to three companies situated in the Asian continent. These companies include Baidu Inc (BIDU), Alibaba Group Holding Limited (BABA), and Tencent Holdings Limited (0700.Hong Kong, TCHEY). Collectively, they are called China BAT stocks and are the biggest internet stocks in the Chinese market.

Understanding BAT Stocks

There are conflicting attitudes regarding the value of BAT stocks as is naturally the situation in the financial market. The investment opportunity presented by BAT has been credited to China’s rapid economic growth as well as a growth in its consumer base. Other investors have opined that Chinese firms have a larger potential domestic market and are more advanced than many United States-based firms in terms of innovations such as mobile payments.

Some are still uncertain about Chinese stocks owing to their tendency to swing speculatively. Hence, skeptics believe that many overvalue BAT. Below are the companies and the performance of these stocks from the company’s listing.

Baidu

Robin Li and Eric Xu co-founded Baidu Inc (NASDAQ: BIDU) in 2000 and since then on, it has grown to become the most popular search engine in China. Baidu’s portfolio of products and services accumulates to over a billion devices monthly, according to the data released by the search engine giant. It has been listed since August 2005 on the NASDAQ and was dual-listed on the Stock Exchange of Hong Kong Limited (SEHK) in March 2021.

Baidu offers its users an encyclopedia similar to that of Wikipedia. However, in contrast to Wikipedia, its editing feature is subject to strict regulation. The search engine also offers music, maps, and media on its platform. Baidu is undertaking researches into artificial intelligence and self-driving cars.

Baidu controls a whopping 79 percent of the domestic market shares in the search engine space as of June 2021. It raked in approximately $16.4 billion in revenue in the 2020 financial year, which was a slight dip from the $16.5 billion it got in 2019. Robin Li has been serving as Baidu’s CEO since 2000.

Alibaba

“China’s Amazon”, or Alibaba Holding Group Ltd (NYSE: BABA), is a multifaceted company that consists of core commerce, digital media, cloud computing, entertainment, and innovation initiatives. Its e-commerce platform is operated through two online channels: Taobao, specifically for consumer-to-consumer commerce, and Tmall, business-to-consumer commerce.

Alibaba came up with Alipay, a payment platform to provide financial services for consumers and merchants. Historical records indicate that 18 persons founded Alibaba in 1999. Jack Ma, a former teacher, was in charge of the team. Yearly active consumers for the Alibaba Ecosystem reached over one billion in March 2021. This figure included 891 million consumers across their retail marketplace in China, local consumer services, entertainment platforms, digital platforms, and approximately 240 million consumers outside China.

Alibaba has a market capitalization of $572.9 billion as of July 2021 and reported a revenue of about $78.6 billion for the 2020 financial year, a significant increase from $58.1 billion in 2019. Daniel Zhang has been the company’s CEO since 2015.

Tencent

Founded in 1998 in Shenzen, China, Tencent Holdings Limited is a multinational investment holding conglomerate that offers a host of products and services. Its line includes social media, web portals, music, mobile games, e-commerce, payment systems, smartphones, and multiplayer online games. Tencent also owns WeChat, a messaging service that boasts over 1.2 billion users monthly.

A notable multiplayer online game that Tencent owns is Clash of Clans. It serves tens of millions of gamers. The app also earned the tag “China’s app for everything” from FastCompany owing to its support for popular payments service and a host of other features. In the 2020 financial year, Tencent reported a revenue of $74.3 billion. It was 27% up from the $58.2 billion that Tencent reported in 2019. One of the company’s co-founders, Pony Ma, serves as its CEO.

BAT Stocks in the Pandemic

The Covid-19 pandemic has had a negative impact on investors’ sentiments and this has been noticeable especially on social media. The spread of the virus has translated into a negative impact on the trading volumes of stocks. BAT stocks suffered as well. The pandemic has done a great deal in raising pessimism in the minds of investors. As the number of new cases continued to increase, the indices of major stocks were dropping in Asia in 2020 and the beginning of 2021. The pandemic decreased stock returns and increased their volatility. A panel data used in analyzing the impact of the outbreak of Covid-19 on the returns of Chinese-listed companies showed that the spread of the coronavirus had a negative effect on the performance of domestic stocks across different industries. Hence, BAT stocks weren’t exempted from the negative impact of the covid-19 pandemic.

US-China Trade War And BAT Stocks

The downturn the Chinese market experienced in 2021 is mainly a result of the US-China trade war. The war snowballed into a significant drop in the price of BAT stocks. The impact of the economic war by these powerful counties has a negative effect on BAT stocks as the end to this economic impasse is not in sight. It is worth noting that US trade does not affect BAT stocks.

Conclusion

The merits of Chinese internet stocks like BAT stocks is that they provide a vivid 15-year growth window until they get to the United States’ saturation level. This is often a result of their growth. However, there is a disclaimer in all of this. Investing in Chinese stocks is not for everyone, but BAT provide opportunities if you are willing to shoulder some added risks.