Vanda Research
- Individual investors have been buying US-listed Chinese stocks as prices slide following Beijing's clampdown.
- Alibaba, Nio, and XPeng are among the top six single stocks scooped up by retail investors, said Vanda Research.
- Retail investors have increasingly become dip buyers, said the firm.
- See more stories on Insider's business page.
Retail investors have been buying up shares of Chinese electric vehicle makers Nio and XPeng and e-commerce heavyweight Alibaba Group during a rout of US-listed Chinese companies set off by Beijing's regulatory clampdown targeting technology and other sectors, according to data released Wednesday.
The three Chinese companies were among the top six most purchased single stocks through this week, with Nio drawing in at least $105 million, Vanda Research said in a note. Those companies sat near the top single stock — Apple — as well as by Advanced Micro Devices and Tesla.
"After last week's record equity purchases, retail activity has been very subdued for the longest part of this week. But as soon as US equities dropped on Chinese contagion fears, the dip-buying army showed up again," said the research firm whose VandaTrack arm keeps tabs on retail investor activity in 9,000 individual stocks and ETFs.
On Monday, Chinese stocks in the US plunged to their lowest level in more than a year after Beijing issued new directives that investors see as potentially undercutting profit at online platforms running food delivery services, and regulations that could severely damage the $100 billion education technology, or tutoring, industry. Alibaba shares fell 7% as that company owns food-delivery service Ele.me.
Meanwhile, retail investors stepped in to claim shares of Nio and XPeng as institutional investors dumped those stocks on fears that EV makers that amass large amounts of customer data may be targeted next by Beijing, said Vanda. Stocks hurt by the regulatory crackdown pulled in combined retail inflows of $239 million, or roughly 14% of total retail purchases, on Monday.
China has been ramping-up an overhaul of business practices and policies, saying its concerns range from cybersecurity, data collection, and privacy issues, high fees, and monopolistic behavior.
"Chinese ADRs are the latest example of how retail behavior has changed over the past 4 months. From driving triple-digit returns in high multiple stocks, they have turned into dip buyers in underperforming ones," said Vanda.
Financials, energy and stocks tied to the reopening of the economy are a few of the sectors where individual investors have cushioned institutional selling, it said.
During last Monday's broad-market selloff, retail investors bought a record $2.18 billion in equities.