China is the world’s No. 2 economy and home to dozens of companies that trade in the U.S. Right now, Trip.com (TCOM), Alibaba (BABA), Tencent Holdings (TCEHY), Li Auto (LI) and NetEase (NTES) are China stocks worth watching or potentially buying.
It’s been a tough couple of years for Chinese stocks. The Covid pandemic, and Beijing’s zero-Covid policy, have slammed the economy. Meanwhile, regulatory crackdowns vs. technology and data-centric firms such as Alibaba (BABA), Tencent (TCEHY) and NetEase (NTES) have been a major headwind. The tech crackdown seems to have eased. But Covid restrictions have largely been rolled back, raising hopes for stronger growth as 2023 goes on.
U.S. tensions are a concern. In recent months, the White House has barred shipments of key chip technology to China, adding to tariffs and other curbs on Chinese goods.
But after a long stretch where it was difficult to find five top China stocks to buy or watch, a growing number of Chinese companies are setting up. Tesla (TSLA) rival BYD (BYDDF), Vipshop (VIPS) and Baidu (BIDU) are among others close to buy points.
Top Chinese Stocks To Buy Or Watch
Company
Ticker
Industry Group
Composite Rating
Tencent Holdings
TCEHY
Internet-Content
N.A.
Trip.com
TCOM
Leisure-Travel booking
97
Alibaba
BABA
Retail-Internet
84
NetEase
NTES
Computer Software-Gaming
88
Li Auto
LI
Auto Manufacturers
51
Tencent Stock
Tencent is China’s messaging and gaming giant, with major payments exposure and with key holdings in an array of Chinese companies, including JD.com.
Tencent earnings unexpectedly rose in Q4, the internet giant reported March 22, with revenue edging up 1%. Earnings had declined for the prior four quarters, and revenue for the previous two, as a big crackdown on internet platforms and new mobile games took a toll.
Tencent hiked its dividend by 50% following Q4 results.
Shares hit 53.01 on Jan. 27 and pulled back. TECHY stock has a cup-with-handle base with a 49.15 buy point, above the 50-day line.
Tencent stock is listed in Hong Kong and trades over the counter in the U.S.
Bottom line: Tencent stock is a buy, but investors may want to wait.
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Trip.com Stock
Trip.com is a Chinese online travel firm, with operations in various countries.
It’s one of the biggest beneficiaries of China’s reopening, with millions of people eager to travel within China and beyond.
Trip.com earnings rose 38% vs. a year earlier, defying views for a loss. Revenue fell 1%, also topping views. The company was bullish on travel, with analysts expected hot growth in 2023-2024.
Trip.com stock more than doubled from the October low of 19.25 to the Jan. 27 peak of 40.17.
A new flat base has formed with a 40.27 buy point. Shares are back above their 50-day line. A decisive move above the March 23 high of 38.57 would offer an early entry.
Bottom line: TCOM stock isn’t a buy.
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Alibaba Stock
Alibaba is China’s No. 1 e-commerce giant, with major exposure to cloud computing, payments and more. After years of facing harsh regulatory scrutiny, Alibaba announced it would split the company into six independent units, which could pursue their own IPOs.
That reorganization sent shares soaring above their 200-dy and 50-day lines. BABA stock then consolidated for a few days just above the 50-day, forging a handle.
The official base buy point is 105.15.
Alibaba stock has earnings and revenue growth have been spotty, but investors are betting on stronger growth as China’s economy picks up steam.
Bottom line: BABA stock is not a buy.
Li Auto Stock
Li Auto makes premium hybrid SUVs, though it’s moving down the price scale as it expands its lineup, with a non-SUV on the horizon.
Li Auto is expanding rapidly and is already profitable. Consistent profits have been tricky, but with the end of Covid restrictions and production ramping up, Li Auto is set to see booming earnings in 2023 and 2024.
On April 1, Li Auto reported March deliveries of 20,823 hybrid SUVs, up 89% vs. a year earlier. That’s up 25% vs. 16,620 in February. Q1 sales totaled 52,584, at the lower end of its late February forecast of 52,000-55,000.
March sales include the new L7, a five-seat electric SUV.
China’s EV price war is a concern. While the price war is most intense at the 200,000-300,000 RMB segment, the premium segment is getting increasingly crowded. And Li Auto’s move toward the mainstream market, while greatly expanding its target audience, also exposes itself to fierce competition.
LI stock hit a 52-week high of 41.49 last June, then tumbled all the way to 12.52 on Oct. 24. Shares more than doubled to 27.48 on Feb. 2. Since then, Li Auto stock has consolidated, forging a double-bottom buy point of 25.46. Li Auto hit resistance at the 200-day line and near the buy point, retreating to just below the 50-day.
Bottom line: LI stock is not a buy.
NetEase Stock
NetEase is a China mobile gaming giant.
Q4 EPS fell 32% vs. a year earlier, while revenue dipped 4%.
After running from 53.09 in late October to 93.19 in late January,
NTES stock has forged an 18%-deep consolidation, mostly above the 50-day and 200-day lines, with a 93.29 buy point. Shares gapped above the 50-day line on March 23 and breaking a trendline, perhaps in reaction to gaming giant Tencent’s earnings. That offered an early entry.
But at this point, NetEase has a handle with a 91.29 buy point.
Bottom line: NTES stock is not a buy.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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