Hedge funds and other investors were not impressed by a series of lucrative earnings reports from Baidu and other Chinese internet giants.。Due to various macro factors, these investors have cut their exposure to domestic Internet companies and seem to be waiting for more good news。

Last week, search engine giant Baidu and e-commerce giant Alibaba Group released their first earnings briefings since the outbreak reopened the economy.。While both of these Internet-headed companies' earnings easily exceeded market expectations and made optimistic forecasts for a recovery in demand, the shares of both companies showed an overall downward trend.。

John Pinkel, a partner at New York-based hedge fund Indus Capital, said: "For now, geopolitical risks remain high, valuations are higher than they were a few months ago, and we are cautious about this.。Pinkel said his Indus Select Strategy increased its exposure in the fourth quarter but is now stagnant.。

Mark Dong, co-founder of Hong Kong-based Minority Asset Management, said: "Last quarter's results may not reflect the full picture of reopening, as business activity will only gradually resume in 2023.。"

The Internet Industry Index nearly doubled between late October 2022 and January 2023, but has since fallen 20%.。Hang Seng Tech Index also erased one-third of October-January gains。

Jon Withaar, head of special circumstances for Asia at Pictet Asset, which manages hedge funds at Swiss asset management, said he was a little surprised that "the market is falling so fast."。"What we have seen in the last few weeks is rapid profit taking.。Long-term investors are taking it slow, "Withaar said.。

Withaar also said he was optimistic that e-commerce companies would benefit from the growth in consumer spending, but he remained negative about food delivery and short video companies because of fierce competition.。

Chinese Internet companies, whose shares are mostly listed on American Depositary Receipts (ADRs) or in Hong Kong, have significant exposure to foreign investors who use heavyweights such as Alibaba as proxies for their holdings in the world's second-largest economy.。

Global hedge funds such as Bridgewater Associates, Tiger Asset Management and Coatue Management are major shareholders in Chinese Internet stocks, making the industry more vulnerable to the global economic cycle.。

Steven Leung, executive director of head brokerage Dahua Jixian Hong Kong, said investors are generally interested in ChatGPT-like artificial intelligence topics, but they are currently waiting for the next catalyst, while the market is still under pressure due to the possibility of further interest rate hikes by the Federal Reserve (Fed).。

"Over the past five months, regulations regarding the internet industry have been loosening.。Given the sell-off we've seen in platform internet companies, this provides an opportunity for stocks to rally, "said Timothy Moe, chief equity strategist at Goldman Sachs Asia Pacific, who believes valuations remain attractive.。