In this article, we discuss the 5 best Chinese stocks to buy now. Even though an interest rate hike by the Federal Reserve has dampened hopes of a soft landing for the United States economy, several growth stocks in the US markets that operate from China have been registering steady gains amid the easing of virus restrictions in the Asian country and ahead of a week-long national holiday. The National Day Golden Week, set to begin from October 1, is a boom for tourism and consumption in China. The Chinese central bank has also been propping up the sentiments by stepping up cash injections.
Some of the best Chinese stocks to buy in this macro environment include Alibaba Group Holding Limited (NYSE:BABA), JD.com, Inc. (NASDAQ:JD), and Baidu, Inc. (NASDAQ:BIDU). However, larger concerns still hover over the state of the Chinese economy. Profits at industrial firms in the country have shrunk at a faster pace in the period between January and August, compared to the previous year, as a deepening property slump weighs on demand. The threat of more covid lockdowns also looms large over Macau.
According to a reportby news agency Reuters, securities regulators in China recently told some fund managers and brokers to avoid massive equity sales ahead of the Communist Party Congress next month. The move is widely seen as an effort to avoid big market fluctuations before the big event. Investors are buying the dip on Chinese stocks as Beijing winds down a regulatory crackdown against big tech firms and agrees to let the US scrutinize the financials of Chinese firms through independent auditors.
Our Methodology
The companies that have deep links with the Chinese economy were selected for the list. The analyst ratings of these firms and the latest updates related to them are also discussed to provide some additional context. Data from around 900 elite hedge funds tracked by Insider Monkey in the second quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
Number of Hedge Fund Holders: 14
Tencent Music Entertainment Group (NYSE:TME) operates online music entertainment platforms to provide music streaming, online karaoke, and live streaming services in China. It is one of the top Chinese stocks to invest in. On September 21, the company successfully listed on the Main Board of The Stock Exchange of Hong Kong. The listing occurred by way of introduction of the Class A ordinary shares on the Hong Kong exchange. The firm remains primarily listed on the stock exchange in New York.
On August 31, Tencent Music Entertainment Group (NYSE:TME) announced that it would be partnering with Billboard to highlight the music industry of China across the globe and share the global content of Billboard on Chinese channels.
At the end of the second quarter of 2022, 14 hedge funds in the database of Insider Monkey held stakes worth $116 million in Tencent Music Entertainment Group (NYSE:TME), compared to 20 the preceding quarter worth $123.5 million.
In its Q4 2021 investor letter, Saltlight Capital, an asset management firm, highlighted a few stocks and Tencent Music Entertainment Group (NYSE:TME) was one of them.Hereis what the fund said:
“Marketplaces must overcome the two-sided problem from Cold Start (zero buyers and sellers) to the Allee Threshold by generating liquidity. There is strong inertia in the early stages that requires offsetting momentum. Energy and capital are the only controllable tools and then luck and timing play a role too.
There are countless ways to generate liquidity on platforms but in marketplaces, the first goal is to get a buyer to try the app/website. The succeeding goals are to buy…and then buy again and again.
Retention loops (product reviews, next purchase discounts etc) take the buyer on a journey from ‘trier’ to ‘habitual buyer’. At all stages, friction should be culled to lessen churn and preserve the lifetime value of the user (…read more).”
Number of Hedge Fund Holders: 22
Vipshop Holdings Limited (NYSE:VIPS)operates online platforms for various brands in the People's Republic of China. The firm is among the best Chinese stocks to invest in. On August 22, the firm posted earnings for the second quarter of 2022, reporting earnings per share of $0.37, beating estimates by $0.12. The revenue over the period was $3.7 billion, down over 19% compared to the revenue over the same period last year but beating market estimates by around $300 million.
On August 22, Credit Suisse analyst Ashley Xu upgraded Vipshop Holdings Limited (NYSE:VIPS) stock to Outperform from Neutral and raised the price target to $12 from $10.30, noting the firm had streamlined cost structure across categories.
At the end of the second quarter of 2022, 22 hedge funds in the database of Insider Monkey held stakes worth $440.8 million in Vipshop Holdings Limited (NYSE:VIPS), compared to 20 in the previous quarter worth $389.5 million.
In its Q3 2021 investor letter, Oakmark Funds, an asset management firm, highlighted a few stocks and Vipshop Holdings Limited (NYSE:VIPS) was one of them.Hereis what the fund said:
“Vipshop Holdings Limited (NYSE:VIPS) (China) offers a differentiated value proposition to its customers via its online product sales and distributions services. We like that the business model is asset-light due to inventory being predominantly on consignment and logistics outsourced to a third party. We believe the company should generate meaningful free cash flow moving forward.”
Number of Hedge Fund Holders: 24
XPeng Inc. (NYSE:XPEV)designs, develops, manufactures, and markets smart electric vehicles in China. The company is one of the most prominent Chinese stocks to invest in. On September 21, the company said that the fast-charging G9 SUV would be a key demand driver for the firm ahead of the scheduled start of deliveries in October. He Xiaopeng, the CEO of the firm, said during a recent launch event that the vehicle is the fastest charging mass-production SUV currently available to consumers.
On September 22, Morgan Stanley analyst Tim Hsaio maintained an Overweight rating on XPeng Inc. (NYSE:XPEV) stock with a price target of $41, noting the firm had offered an upbeat volume outlook for the coming months.
At the end of the second quarter of 2022, 24 hedge funds in the database of Insider Monkey held stakes worth $618.7 million in XPeng Inc. (NYSE:XPEV), compared to 26 in the preceding quarter worth $783.9 million.
Number of Hedge Fund Holders: 25
Bilibili Inc. (NASDAQ:BILI)provides online entertainment services for the young generation in China. The firm features on the list of best Chinese stocks to invest in. On September 8, the firm posted earnings for the second quarter of 2022, reporting a revenue of $732 million, up over 9% compared to the revenue over the same period last year and beating market estimates by around $29 million. The firm said that average monthly active users reached 305.7 million, a 29% increase from the same period in 2021.
On September 9, Benchmark analyst Fawne Jiang maintained a Buy rating on Bilibili Inc. (NASDAQ:BILI) stock and lowered the price target to $30 from $56, noting that user growth and engagement remain robust for the firm.
At the end of the second quarter of 2022, 25 hedge funds in the database of Insider Monkey held stakes worth $492 million in Bilibili Inc. (NASDAQ:BILI), compared to 24 in the previous quarter worth $468.9 million.
In its Q3 2021 investor letter, Tao Value, an asset management firm, highlighted a few stocks and Bilibili Inc. (NASDAQ:BILI) was one of them.Hereis what the fund said:
“As witnessed in the past quarter, the government intervention in the Chinese private sector is elevated to an unprecedented level. Given this background, I thoroughly reviewed all our Chinese holdings and made a few changes. We also exited Bilibili Inc. (NASDAQ:BILI), given its priced-in valuation in the context of Chinese ADR confidence loss.”
Number of Hedge Fund Holders: 25
NIO Inc. (NYSE:NIO) designs, develops, manufactures, and sells smart electric vehicles in China. It is one of the premier Chinese stocks to invest in. On September 26, the company announced that it had acquired a stake in Australian lithium firm Greenwing. Both firms entered into a strategic financing deal under which the former agreed to pay A$12 million to subscribe for 21.82 million Greenwing shares at a deemed issue price of A$0.55/share. The Chinese carmaker will hold a 12.16% position in Greenwing upon completion of the transaction.
On September 12, Deutsche Bank analyst Edison Yu maintained a Buy rating on NIO Inc. (NYSE:NIO) stock with a price target of $39, noting the firm was on a path to emerge as a leader among electric vehicle upstarts.
At the end of the second quarter of 2022, 25 hedge funds in the database of Insider Monkey held stakes worth $873.9 billion in NIO Inc. (NYSE:NIO), compared to 26 in the previous quarter worth $716 million.
Along with Alibaba Group Holding Limited (NYSE:BABA), JD.com, Inc. (NASDAQ:JD), and Baidu, Inc. (NASDAQ:BIDU), NIO Inc. (NYSE:NIO) is one of the best Chinese stocks to buy now according to hedge funds.
In its Q1 2022 investor letter, Horos Asset Management, an asset management firm, highlighted a few stocks and NIO Inc. (NYSE:NIO) was one of them.Hereis what the fund said:
“At the beginning of April the CSRC (China Securities Regulatory Commission) announced possible changes in its regulation that would allow this inspection by foreign auditors, provided that the companies previously communicate to this body the state secrets that would be exposed, as well as the sensitive information that they might have to hand over, and the subsequent audit is carried out in a framework of collaboration with the CSRC. In short, a move in the direction desired by the SEC, although still far from the optimal result, that is, unrestricted access to information. While these negotiations between the two regulatory bodies are progressing, Chinese companies have to decide how best to preserve their interests. Other entities, such as the electric vehicle manufacturer NIO Inc. (NYSE:NIO), have just started trading on this stock market.”
Comments
Number of Hedge Fund Holders: 24
XPeng Inc. (NYSE:XPEV)designs, develops, manufactures, and markets smart electric vehicles in China. The company is one of the most prominent Chinese stocks to invest in. On September 21, the company said that the fast-charging G9 SUV would be a key demand driver for the firm ahead of the scheduled start of deliveries in October. He Xiaopeng, the CEO of the firm, said during a recent launch event that the vehicle is the fastest charging mass-production SUV currently available to consumers.
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