For many years, investors have been obsessed with Chinese stocks and the potential growth opportunities in the region. There’s good reason for that, too, as China is currently the world’s second-largest economy behind the U.S., boasting a massive population of about 1.4 billion.
But while it once seemed inevitable that this nation would eventually overtake the U.S., lately, China has been stumbling in the race to catch up. After years of taking on debt and overbuilding in its real estate sector, growth forecasts have plateaued — and stocks have, too. As an example, the popular iShares China Large-Cap ETF (ticker: FXI) is actually down 3% in 2023 (including dividends) in what has otherwise been a darn good year for stock market investors.
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Recent troubles aside, however, it’s undeniable that there’s a lot of possibility and promise in Chinese stocks despite these recent headwinds. That may mean investors need to be more selective than in past years, but it doesn’t mean you should overlook this marketplace altogether. The following seven Chinese stocks all are looking up based on recent share performance or sales metrics:
— Li Auto Inc. (LI)
— Nio Inc. (NIO)
— New Oriental Education & Technology Group Inc. (EDU)
— NetEase Inc. (NTES)
— Baidu Inc. (BIDU)
— Trip.com Group Ltd. (TCOM)
— Vipshop Holdings Ltd. (VIPS)
Li Auto Inc. (LI)
Li Auto is a China-based electric vehicle startup. But while it is only producing a fraction of the vehicles per month as its domestic rival Tesla Inc. (TSLA), LI stock is already valued at a staggering $40 billion based on its long-term expansion plans. As proof of its growth potential, Li said it delivered just under 35,000 vehicles in August — up an amazing 660% from the prior year. It also is pushing into profitability, which may help investors hang on to this China stock if and when the marketplace gets volatile in the future.
Nio Inc. (NIO)
Nio is another Chinese EV company, though it is about half the size of LI in both market value and deliveries. However, the growth is equally impressive with 81% year-over-year growth in its August deliveries. The addressable market is enormous in China, and there’s clearly room for two home-grown companies to capitalize on this opportunity. While NIO is admittedly lagging a bit behind LI stock in both output as well as share price performance, it remains a top China stock to watch.
New Oriental Education & Technology Group Inc. (EDU)
New Oriental has a unique niche as the largest provider of private, for-profit educational courses in China. As you can imagine, it blew up during the COVID-19 pandemic as traditional in-person schooling was not an option … and then crashed back to earth in 2021 when that initial demand plateaued and then waned. However, it’s worth noting that shares have nearly tripled from their 2021 lows as the company has normalized and built a track record of consistent profitability that investors no longer believe is a flash in the pan. Case in point: Shares are up more than 60% in 2023, recently setting a new 52-week high at the start of September.
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NetEase Inc. (NTES)
China video game stock and online services company NetEase is a bit volatile, as it has to rely on both broader consumer spending trends as well as the strength of its latest batch of titles. However, it also offers a search engine, streaming music and other internet services to help smooth out some of the bumps in the road. Shares have roughly doubled off their 52-week lows and have strong momentum right now, thanks in part to a dividend increase that should give investors confidence that NTES has staying power.
Baidu Inc. (BIDU)
Another online services powerhouse, Baidu is sometimes referred to as the Google of China thanks to services such as internet search services, wikis, maps and navigation apps, marketing and advertising platforms, cloud computing and much more. The stock has underperformed in recent years thanks to what was seen as slowing operations, but Q2 numbers in August showed revenue may be on the upswing as the company beat estimates on both the top and bottom line. If you’re looking for growth at a reasonable price in China, this overlooked internet stock may be more fairly valued than some of the high-flying EV companies on this list.
Trip.com Group Ltd. (TCOM)
Another internet-focused firm, TCOM is the Asian equivalent of Expedia Group Inc. (EXPE) or Booking Holdings Inc. (BKNG) in that it offers a portal to book hotels, flights and more. China was slower to open up its economy after the pandemic, but it is now on the rise just as we saw pent-up demand fuel a spending surge in the U.S. a year or two ago. Founded in 1999 and headquartered in Shanghai, TCOM has a rich history and local expertise that will help it capitalize on any tourism resurgence in a way that other competitors simply cannot.
Vipshop Holdings Ltd. (VIPS)
Vipshop is a mid-sized e-commerce company in China that probably isn’t recognized by most Western investors. But the retail company is popular in part because it looks to serve lower-income Chinese shoppers with a discount approach, a strategy that has allowed it to stand out and compete with larger e-commerce providers. Its specialty is “flash” sales that offer big price cuts, a marketing tactic that connects with its customers and drives enough volume to ensure it is comfortably profitable even if margins can be a bit tight. Particularly if you’re concerned with the economic outlook in China, VIPS could be a way to play the local consumer without depending on a perpetually positive outlook. Discounters like this tend to do much better than their upmarket competitors in times of stress.
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7 Best Chinese Stocks to Buy originally appeared on usnews.com
Update 09/13/23: This story was previously published at an earlier date and has been updated with new information.
