(Reuters) - J.P. Morgan analysts upgraded the stocks of some Chinese internet companies on Monday and the brokerage expects "significant uncertainties" faced by the sector to abate.
China signaled an easing of its crackdown on the once-freewheeling tech sector last month as President Xi Jinping seeks to bolster the economy in the face of growth-sapping COVID-19 lockdowns.
The brokerage hiked the rating and price targets for stocks such as Alibaba (NYSE:BABA) Group, Baidu (NASDAQ:BIDU), Pinduoduo (NASDAQ:PDD) Inc and Bilibili (NASDAQ:BILI).
"We expect early-cycle sectors such as digital entertainment, local service, and e-commerce to be the first batch of outperformers," Alex Yao, analyst at J.P. Morgan, said.
Earlier in March, the brokerage downgraded 28 Chinese internet stocks to "neutral" or "underweight", citing rising uncertainty from a regulatory crackdown and de-listing risks.
Chinese companies have also faced the brunt of supply chain bottlenecks due to the pandemic and strict lockdowns in some cities as the world's second-largest economy pursues a "zero-COVID" policy.