Five Best Chinese Stocks To Buy And Watch Now
Hundreds of Chinese companies are listed on U.S. markets. But which are the best Chinese stocks to buy or watch right now? 360 Digitech (QFIN), NetEase (NTES), Futu Holdings (FUTU), Bilibili (BILI) and Trip.com (TCOM).
China is the world’s most-populous nation and the second-largest economy with a booming urban middle class and amazing entrepreneurial activity. Often dozens of Chinese stocks are among the top performers at any given time, across an array of sectors.
Best Chinese Stocks Across Many Industries
As the world’s largest internet market, it’s no surprise to see big growth from China stocks focusing on e-commerce, messaging or mobile gaming. Notable Chinese internet stocks include:
Alibaba (BABA)
JD.com (JD)
Pinduoduo (PDD)
Tencent (TCEHY)
Vipshop (VIPS)
Baidu (BIDU)
Tencent Music Entertainment (TME)
NetEase (NTES)
Trip.com (TCOM)
Dada Nexus (DADA)
Bilibili (BILI)
Joy (YY)
KE Holdings (BEKE)
In electric vehicles, several Chinese companies are becoming serious rivals to Tesla (TSLA) in the world’s biggest auto market.
Nio (NIO)
Xpeng Motors (XPEV)
Li Auto (LI)
BYD Co. (BYDDF)
Several Chinese financial firms or brokerages listed in the U.S.
Futu Holdings (FUTU)
Up Fintech (TIGR)
360 Digitech (QFIN)
Noah Holdings (NOAH)
Several China stocks are in solar power
Daqo New Energy (DQ)
JinkoSolar (JKS)
For-profit education Chinese stocks are a notable non-tech sector.
New Oriental Education (EDU)
Tal Education (TAL)
17 Education & Technology Group (YQ)
GSX Techedu (GOTU).
Don’t forget stocks in other fields, such as beauty products maker Yatsen (YSG) or data-center operator GDS Holdings (GDS).
Chinese Stock Risks
Investors should be aware of significant risks with investing in Chinese stocks. The authoritarian state and its regulators can impose sweeping restrictions, fines or bans on major companies, often with little notice or transparency.
Alibaba ran afoul of regulators in late 2020, with regulators opening probes into internet platforms and suspending the Ant Group IPO. In April, China fined Alibaba $2.8 billion for anti-competitive actions and ordered it to change various practices.
Ant Group is limiting the scope of some of its businesses to comply with regulators’ demands.
On April 29, financial regulators ordered several big internet companies, including Tencent, to stop providing financial services aside from payments.
Further antitrust probes and fines are likely for other internet giants.
Accounting fraud, while less likely with institutional-quality names such as Alibaba, remains a concern. Luckin Coffee admitted to widespread fraud in 2020. Fraud charges alone can trigger massive share price losses.
For-profit education firms, which have faced accounting questions, have come under pressure as local and national officials call for new regulations for the sector.
Meanwhile, a new U.S. law could force Chinese companies to delist from U.S. markets. That threat isn’t imminent, and could be averted with negotiations between the Treasury Department and Beijing over accounting oversight. Still, it’s something that could loom large for China stocks in the coming years.
China Stock Investing Via ETFs
One way to minimize individual China stock risks is via ETFs. Another advantage of buying ETFs is that a growing number of Chinese companies are listing in Hong Kong or Shanghai, instead of in addition to the U.S.
KraneShares CSI China Internet ETF (KWEB) tracks major Chinese internet companies. Many Chinese stock holdings in the KWEB ETF are U.S.-listed or traded, such as Alibaba stock, JD.com, Tencent, Pinduoduo and Bilibili, but KWEB also holds companies listed on Chinese markets. Direxion Daily FTSE China Bull (YINN), a three-times levered ETF of the 50 largest companies listed in Hong Kong, including Alibaba, JD.com and Tencent stock, but its biggest weights are in financials. (The Direxion Daily FTSE China Bear (YANN) is a three-times levered ETF shorting Hong Kong’s biggest companies.)
Stock Market Trend Key
As always, investors should be following the overall stock market trend, adding exposure in confirmed uptrends and paring exposure or going fully to cash in corrections or bear markets. Right the stock market rally remains under pressure.
Best China Stocks To Buy: Key Ingredients
Focus on the best stocks to buy and watch, not just any Chinese companies.
IBD’s CAN SLIM Investing System has a proven track record of significantly outperforming the S&P 500. Outdoing this industry benchmark is key to generating exceptional returns over the long term.
Look for companies that have new, game-changing products and services. Invest in stocks with recent quarterly and annual earnings growth of at least 25%.
Start with those with strong earnings growth, such as Alibaba or Pinduoduo stock. If they’re not profitable, at least look for rapid revenue growth as with Nio stock. The best China stocks should have strong technicals, including superior price performance over time. But we’ll be highlighting stocks that are near proper buy points from bullish bases or rebounds from key levels.
Truth be told, Chinese stocks have been out of favor. Whether it’s a general malaise for growth stocks or EV names such as Nio and Xpeng, or a regulatory crackdown for Alibaba, JD.com and other internets, U.S.-listed Chinese stocks have generally not fared well in 2021.
But there are signs that China stocks are finally starting to bounce back.
Best Chinese Stocks To Buy Or Watch
Company Ticker Industry Group Composite Rating
360 Digitech QFIN Financial Services-Specialty 99
Bilibili BILI Internet-Content 45
Futu Holdings FUTU Finance-Investment banks/brokerages 99
NetEase NTES Computer Software-Gaming 64
Trip.com TCOM Leisure-Travel booking 42
So let’s analyze these five top China stocks: 360 Digitech stock, Bilibili stock, Futu stock, NetEase stock and Trip.com stock.
360 Digitech Stock
360 Digitech’s data-driven digital platform helps financial institutions target products to consumers.
That’s paying off. 360 Digitech earnings growth has accelerated for four straight quarters. In its first quarter report released on May 27, 360 Digitech earnings surged 458% vs. a year earlier, crushing views. Sales also beat easily, though growth slowed significantly to 22%.
In a delayed reaction, QFIN stock skyrocketed 20% on June 1. On Friday, shares spiked to a record high.
QFIN stock is technically within range of an an alternate buy point of 35.25 for the IBD 50 stock, but looks extended right now. With the exception of a couple days, 360 Digitech has risen almost straight from the bottom in just a few weeks.
Investors could have bought QFIN at a 28.61 double-bottom buy point, or perhaps as it cleared a pseudo-handle on June 1.
If QFIN stock can consolidate near current levels, it might offer a new entry.
The relative strength line for QFIN stock is back at record highs. The RS line, the blue line in the charts provided, tracks a stock’s performance vs. the S&P 500 index.
QFIN stock has a best-possible 99 IBD Composite Rating.
Bilibili Stock
Bilibili Stock
Bilibili provides an online entertainment platform targeting younger generations in China. In addition, the platform includes videos, live broadcasting, and mobile games.
The company is not yet profitable, and is projected to keep losing money through at least 2022. But sales growth has been strong, with Q1 revenue up 82%.
Bilibili stock nearly tripled from a late November breakout to the Feb. 11 peak of 157.66. Shares then corrected 46% to 84.40 on May 13, finding support just above the 200-day line.
BILI stock rebounded above its falling 50-day line on May 28. Shares are still finding support around that level. There’s an early entry for Bilibili stock at 122.83.
The RS line has fallen significantly since early February after a big uptrend, but is trying to bounce back.
Futu Stock
Futu Holdings is a Chinese online brokerage and wealth management firm.
Futu earnings shot up 531% per share in the first quarter, easily beating views. Revenue growth leapt 348%, accelerating for a sixth straight quarter.
The EPS Rating is an 84. The Composite Rating for FUTU stock is 99.
Since clearing a downward-sloping trend line at the end of 2020, FUTU stock erupted for a gain of more than 480% to its Feb. 10 peak of 204.25. Shares then lost more than half their value by late March 25 before rebounding again. On April 19, FUTU stock exploded for a 16% gain, breaking out of a deep, loose cup-with-handle base. But shares plunged 23% the following session on a proposed stock offering, which priced a couple days later.
FUTU stock reclaimed its 50-day line on May 26.
The official buy point is 204.35, but 178.28 is an early entry. FUTU stock is nearing an extremely aggressive trend line entry.
On June 1, Futu said it gained 100,000 accounts in Singapore since launching there three months ago.
The RS line for this China stock leader is well off highs but that follows a stretch of massive outperformance.
NetEase Stock
The mobile gaming giant on May 18 reported a 25% EPS gain on a 30% revenue gain for the first quarter, both topping views. That followed two quarters of declining EPS.
NTES stock has been a leading U.S.-listed China stock since 2000. But it announced in late May that it plans a Hong Kong IPO for its streaming music service.
Its current consolidation is only 26% deep, much better than many Chinese stocks. NTES stock bottomed in late March, just above its 200-day line and right around the top of a prior base, both natural areas of support.
NetEase has a handle but the midpoint is a few cents below the midpoint of the base, so it’s technically not valid. But investors could use 120.94 as an early entry. The official buy point is 134.43, according to MarketSmith.
The Composite Rating for NTES stock is 64.
The RS line for NTES stock is well off highs.
Trip.com Stock
Trip.com is a China-based online travel site, but serving customers around the world. Brands include Ctrip, Qunar, Trip.com and Skyscanner.
Due to the coronavirus crisis, Trip.com lost money in the first half of 2020. Profits returned in Q3 and Q4, falling 35% and 4%, respectively, vs. a year earlier. Revenue plunged throughout 2021. With the pandemic fading and travel returning, analysts expect Trip.com to earn 54 cents a share in 2021 and $1.60 in 2021, vs. $1.54 in 2019 and a 23-cent loss in 2020.
Trip.com stock in late April attempted to break out from a narrow double-bottom base. But that attempt quickly fizzled. Shares plunged below their 50-day line, but on May 18 closed above that key level.
TCOM stock on May 28 closed just above a new handle buy point of 41.81. But shares retreated below that level in early June.
source:investors.com