In this article, we discuss 10 stocks to buy as virus restrictions are lifted in China. If you want to read about some more stocks to buy as virus restrictions are lifted in China, go directly to 5 Stocks to Buy As Virus Restrictions Are Lifted in China.
In early June, the Chinese government approved at least 60 new video game licenses. The approval triggered a series of positive developments in the technology sector of the country, with the Hang Seng Tech Index jumping close to 5% amid a broad rally in the prices of prominent Chinese stocks like Alibaba Group Holding Limited (NYSE:BABA), Baidu, Inc. (NASDAQ:BIDU), and NIO Inc. (NYSE:NIO). The approvals were important since they indicated that a year-long crackdown by Beijing against dual-listed companies was nearing an end.
In the past twelve months, this crackdown has wiped nearly $2 trillion in market capitalization from the technology sector in China. Last year, Beijing had imposed strict restrictions on video games amid broad-reaching measures designed to “curb addiction” among young adults. Chinese tech IPOs, which had raised billions in blockbuster debuts on the US market, had also stopped during the crackdown. As restrictions ease, the market has been boosted by reports that these IPOs may soon resume as well.
Analysts Turn Positive on China Tech Sector, Citizens Brace for “New Start”
Even though the Hang Seng Tech Index has climbed nearly 40% from its lows in March, it is still nearly 51% below the highs it reached in 2021 before the crackdown began. Analysts have been upgrading their forecasts on China as well. Per news platform Bloomberg, Ayaz Ebrahim, a portfolio manager at investment bank JPMorgan, has claimed that investors can “get more juice out of China” in the coming six-month period. Winnie Wu, a China equity strategist at Bank of America Securities, has also predicted a broad rally in the internet sector during the period.
The broad rally in Chinese tech stocks has also helped growth investors that were being battered due to rising inflation and interest rates in the US. The easing of virus-related restrictions in China since late May as coronavirus cases decline is also helping fuel the positivity around Chinese stocks. On May 31, Yin Xin, a spokesperson for the municipal government in Shanghai, told state-sponsored Global Times the city was embracing a “new start” and the daily briefing on the coronavirus would no longer take place.
Our Methodology
The companies that are best positioned to rise as virus restrictions are lifted in China were selected for the list. The firms that have registered an increase of at least 7% in their share price over the past month were preferred for the list. The business fundamentals and analyst ratings of these firms are also discussed to provide further context. An extensive database of around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to identify the popularity of each stock among hedge funds.
andre-benz-MsMISAIe8Qw-unsplash
Stocks to Buy As Virus Restrictions Are Lifted in China
10. Lufax Holding Ltd (NYSE:LU)
Number of Hedge Fund Holders: 12
Increase in Share Price Over Past Month: 7.91%
Lufax Holding Ltd (NYSE:LU) provides tech-based finance services. On May 24, the company posted earnings for the first quarter of 2022, reporting earnings per share of $0.34, beating market estimates by $0.03. The revenue over the period was $2.73 billion, up more than 17% compared to the revenue over the same period last year and surpassing market estimates by $150 million. In March, the company had declared an annual dividend of $0.68 per share. The forward yield was 12.12%.
On May 9, investment advisory CCIC initiated coverage of Lufax Holding Ltd (NYSE:LU) stock with an Outperform rating and a price target of $7.80. CLSA analyst Hans Fan also has an Outperform rating on the stock with a price target of $6.80.
At the end of the first quarter of 2022, 12 hedge funds in the database of Insider Monkey held stakes worth $222 million in Lufax Holding Ltd (NYSE:LU), compared to 22 the preceding quarter worth $244 million.
Just like Alibaba Group Holding Limited (NYSE:BABA), Baidu, Inc. (NASDAQ:BIDU), and NIO Inc. (NYSE:NIO), Lufax Holding Ltd (NYSE:LU) is one of the stocks that elite investors are monitoring as China eases lockdowns.
9. XPeng Inc. (NYSE:XPEV)
Number of Hedge Fund Holders: 26
Increase in Share Price Over Past Month: 13.10%
XPeng Inc. (NYSE:XPEV) makes and sells electric vehicles. On June 1, the company announced electric vehicle delivery results for May, reporting that it had delivered 10,125 smart EVs in the period, up more than 78% compared to the deliveries for May 2021. The May 2022 number was also up over 12% compared to the deliveries for April 2022. At the end of May, the firm said that the year-to-date deliveries had reached 53,688, an increase of more than 122% compared to the previous year.
On May 24, JPMorgan analyst Nick Lai maintained an Overweight rating on XPeng Inc. (NYSE:XPEV) stock and lowered the price target to $35 from $42, predicting that the share price will follow a “V-shaped rebound in production and profitability” in the coming months.
At the end of the first quarter of 2022, 26 hedge funds in the database of Insider Monkey held stakes worth $783 million in XPeng Inc. (NYSE:XPEV), compared to 29 in the preceding quarter worth $1.1 billion. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Tiger Global Management LLC is a leading shareholder in XPeng Inc. (NYSE:XPEV), with 13.7 million shares worth more than $378 million.
8. NetEase, Inc. (NASDAQ:NTES)
Number of Hedge Fund Holders: 29
Increase in Share Price Over Past Month: 14.27%
NetEase, Inc. (NASDAQ: NTES) provides interactive home entertainment services. On May 24, the company posted earnings for the first quarter of 2022, reporting earnings per share of $1.23 and a revenue of $3.7 billion. The gross profit over the period was $2,024 million, compared to RMB11,052 million in the first quarter of 2021. The gross profit for the fourth quarter of 2021 had been RMB11,052 million. The total cash and cash equivalents at the end of March 2022 were close to $17 billion, compared with RMB103 billion at the end of December 2021.
On May 16, JPMorgan analyst Alex Yao upgraded NetEase, Inc. (NASDAQ:NTES) stock to Overweight from Underweight and raised the price target to $120 from $60, noting that the uncertainties around the China tech sector were beginning to abate.
Among the hedge funds being tracked by Insider Monkey, Bermuda-based investment firm Orbis Investment Management is a leading shareholder in NetEase, Inc. (NASDAQ:NTES), with 6.4 million shares worth more than $577 million.
7. Dada Nexus Limited (NASDAQ:DADA)
Number of Hedge Fund Holders: 10
Increase in Share Price Over Past Month: 16.49%
Dada Nexus Limited (NASDAQ:DADA) provides retail and delivery services. The company recently reported a 60% year-on-year increase in revenue, excluding the impact of new rider arrangements, which indicates that the coronavirus-related drive to online shopping, which has become the new normal in China, looks likely to extend beyond the virus lockdowns. The quarterly results of the firm also show that the net loss for the company has narrowed, and profitability will likely increase in the months ahead.
On May 16, JPMorgan analyst Andre Chang upgraded Dada Nexus Limited (NASDAQ:DADA) stock to Overweight from Neutral and raised the price target to $10 from $7.50, backing the firm to be one of the early outperformers in China as a regulatory crackdown ends.
At the end of the first quarter of 2022, 10 hedge funds in the database of Insider Monkey held stakes worth $31 million in Dada Nexus Limited (NASDAQ:DADA), compared to 15 in the preceding quarter worth $86 million.
6. Canaan Inc. (NASDAQ:CAN)
Number of Hedge Fund Holders: 7
Increase in Share Price Over Past Month: 21.10%
Canaan Inc. (NASDAQ:CAN) markets technology hardware, storage, and peripherals. The stock has climbed in the past few weeks after the company reported that it had resumed production and delivery of digital coin mining machines since March. The quarterly results of the firm were also in line with market estimates, with the firm reporting a revenue of $213 million. In guidance numbers for the second quarter, the company said that it expected net revenue to range from $252.4 million to $283.9 million against consensus estimates of $276.1 million.
On June 7, Benchmark analyst Michael Legg initiated coverage of Canaan Inc. (NASDAQ:CAN) stock with a Buy rating and a price target of $9, noting the firm was a large mining player and an indirect way of investing in the growth of Bitcoin.
At the end of the first quarter of 2022, 7 hedge funds in the database of Insider Monkey held stakes worth $8.8 million in Canaan Inc. (NASDAQ:CAN), compared to 8 in the preceding quarter worth $16 million. Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Millennium Management is a leading shareholder in Canaan Inc. (NASDAQ:CAN), with 1.1 million shares worth more than $6.2 million.
In addition to Alibaba Group Holding Limited (NYSE:BABA), Baidu, Inc. (NASDAQ:BIDU), and NIO Inc. (NYSE:NIO), Canaan Inc. (NASDAQ:CAN) is one of the stocks that hedge funds have their eye on as China eases virus restrictions.
Click to continue reading and see 5 Stocks to Buy As Virus Restrictions Are Lifted in China.
Suggested Articles:
- 10 Stocks Warren Buffett is Selling
- 10 Best Small-Cap Stocks to Buy According to Hedge Funds
- 10 Best SPACs to Invest In According to Reddit
Disclosure. None. 10 Stocks to Buy As Virus Restrictions Are Lifted in China is originally published on Insider Monkey.
