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JPMorgan Chase
BusinessBanking & Finance

JPMorgan published ‘uninvestable’ call on Chinese internet stocks in its March research report in error

  • The ‘uninvestable’ label wiped out about US$200 billion from US and Asian markets
  • The bank’s editorial staff had asked for the term to be removed from 28 research notes before they were published on March 14

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A publishing error caused JPMorgan to describe Chinese internet stocks as ‘uninvestable’ in a research note in March. Photo: Bloomberg
Bloomberg
In the buttoned-down world of Wall Street research, JPMorgan Chase’s description of Chinese internet companies was an instant shocker: “uninvestable.”
The evocative label helped erase about US$200 billion from US and Asian markets and prompted one Chinese technology company to downgrade JPMorgan’s underwriting role on an upcoming initial public offering.

It was also never meant to see the light of day, according to people familiar with the matter who asked not to be named discussing internal deliberations. JPMorgan editorial staff in charge of vetting the bank’s research asked for “uninvestable” to be removed from 28 reports penned by technology analyst Alex Yao and his team before they were published on March 14, the people said.

While the word was cut from most of the reports – in some cases replaced with “unattractive” – it appeared in the published version of four, including one on JD.com: “As risk management becomes the most important consideration among global investors in relation to their China investment strategy, as they price in China’s geopolitical risks, we view China internet as uninvestable on a six-12-month view with a binary share price outlook.”
A JPMorgan research report described JD.com as ‘uninvestable’. Photo: Reuters
A JPMorgan research report described JD.com as ‘uninvestable’. Photo: Reuters

After looking into what happened, JPMorgan concluded that an editorial error allowed the word to slip through even though the editors, analysts and supervisors involved had all agreed before publication that it was not the best choice of word, the people said. While Yao’s team was undoubtedly turning more cautious on Chinese internet companies, its prediction of share-price gains for at least 10 of them by year-end suggested the sector was not entirely “uninvestable.”

The previously unreported episode highlights the fierce debate across Wall Street over the attractiveness of Chinese assets at a time when crackdowns on the tech sector and zero-Covid lockdowns are roiling the world’s second-largest economy. It also underscores the tightrope act facing global banks like JPMorgan as they try to ramp up their businesses in China while still giving clients access to candid research on the country’s turbulent financial markets.

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