PDD, the parent company of Temu, experiences a nearly 29% drop in share price; analysts deem it an "overcorrection."

• Rein believed that "panic was overblown last night," and saw this as a chance for investors to purchase the stock.
• On Monday, PDD Holdings experienced its largest one-day loss since its Nasdaq listing, with shares falling 28.57% after the company missed expectations in its second quarter results.

According to Shaun Rein, founder and managing director of the China Market Research Group, the nearly 30% drop in shares of Chinese online retailer PDD Holdings is "too much of a correction."

Rein stated on CNBC's "Street Signs Asia" that the panic surrounding the stock market was exaggerated last night, and this presents a buying opportunity for investors.

After seeing their largest one-day loss on the Nasdaq since listing, shares of tumbled 28.57% on Monday following the release of second-quarter results that missed expectations.

While PDD Holdings reported a 86% increase in second-quarter revenue to 97.06 billion yuan, or $13.6 billion, this was below the anticipated quarterly revenue of $14.034 billion, or 99.98 billion yuan, as forecasted by analysts surveyed by FactSet.

PDD's operating profit increased by 156% to 32.56 billion yuan, while its attributable income also rose by 144% to 32.01 billion yuan.

Pinduoduo is a good buy at 30% down, despite failing to meet analysts' expectations, as it is still growing at 20% and 30% and generating billions of dollars in revenue.

Pinduoduo, Sam's Club, and other brands will benefit from economic weakness in the country as Chinese consumers trade down. Pinduoduo is PDD Holding's largest e-commerce platform and features a group buying feature that lowers prices when more people join in.

Rein stated that the focus for the remainder of the year is providing value to the Chinese consumer.

Cautious statements

According to Ben Harburg, portfolio manager at CoreValues Alpha, the sell-off may have been caused by cautious statements from company leadership rather than the second-quarter numbers.

In the earnings release, PDD's chairman and co-CEO, Lei Chen, stated that although they were pleased with the company's recent advancements, there are still many obstacles to overcome.

As Chen stated, the company is willing to make short-term sacrifices and accept a decline in profitability in order to invest heavily in areas such as trust and safety, as well as improving its merchant ecosystem.

PDD's Vice President of Finance Jun Liu echoed his views, stating that revenue growth will face pressure due to intensified competition and external challenges, and profitability will likely be impacted as the company continues to invest resolutely.

PDD faces competition from domestic e-commerce giants such as JD.com, Taobao, and Shein, while globally it competes with established players like Amazon.

The slump in the Chinese e-commerce sector is due to weak consumer growth in China, as evidenced by the weak second-quarter results from JD.com and Alibaba, according to Harburg.

He stated that PDD was not isolated, as it was holding out longer than others in many ways.