In this article, we will look at the 12 Cheap Chinese Stocks to Buy According to Hedge Funds.
Trump’s Back and China’s Stimulus Lags
Trump is back as the President of the United States and China’s stimulus plans have let down investors, which has created more economic uncertainty regarding China. China is trying to fix its economy and Trump’s comeback to the White House means steep tariffs for Chinese-made goods. In his first term, President-elect Donald Trump imposed tariffs up to 25% on Chinese goods, initiating a trade war between two global giants. Trump’s second stint in the office is expected to imply tariffs as high as 60% on Chinese-made goods.
On the other hand, China’s stimulus of $1.5 trillion or nearly 10 billion yuan to back its economy doesn’t seem to appeal the investors. China’s stimulus has come at a time when the economy is struggling badly and there are potential tariff threats from the new U.S. administration. In addition to that, overseas companies are drawing their money out of China as the growth outlook seems gloomier. In the first nine months of 2024, foreign direct investment (FDI) slid nearly $13 billion. According to China’s Administration of Foreign Exchange, the FDI outflows exceeded $8.1 billion in Q3, potentially leading to a net FDI outflow for the first time since 1990. This shows that investors are still pessimistic regarding China’s economic reforms aimed at stabilizing growth.
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Other Problems with the Chinese Economy
The consumer price inflation (CPI) in October eased to 0.3% year-over-year compared to an expected 0.4%, while the producer price index (PPI) dropped by 2.9% year-over-year in October, slightly widening from the 2.8% decline observed in September 2024. Following the U.S. elections and China’s lower-than-expected inflation outcome, UBS has lowered China’s 2025 GDP growth estimate to 4% from the 4.5% it made in October. The Swiss Bank anticipates the GDP growth for 2026 to be also considerably lower.
What Could Happen in the Short-Term and the Long-term?
With Trump’s victory and the news regarding sparking expectations of steep tariffs, U.S. importers are expected to rush to front-load goods from China before the Presidential inauguration in January 2025. This could potentially lead to cost increases and deliver a surprising push to Chinese exports.
In the long run, analysts expect Trump’s tariff policy’s impact on the Chinese economy would be modest. However, the additional tariffs could hit exports and lead to a higher fiscal deficit or currency depreciation for China. Economists at Capital Economics project that the direct impact of large U.S. tariffs on China would be less than 0.5% of its GDP. The reason for this can be exporters finding alternative routes via other countries and also receiving support from depreciation of the yuan.
The Hang Seng Index has plunged more than 4% over the last five days, as of November 15, while the CSI 300 index has plummeted by nearly 2.50% in the last five days and is up by almost 3% in the last month. We can see the mixed reaction of the market considering the recent events.
With that, let’s take a look at the 12 cheap Chinese stocks to buy according to hedge funds.
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Our Methodology
To find the 10 Cheap Chinese Stocks to Buy According to Hedge Funds, first, we used stock screeners and shortlisted Chinese stocks listed on US exchanges with a market capitalization of more than $1 billion and a forward P/E ratio of less than 15, as of November 15. We narrowed down our selection to 10 stocks that were the most widely held by institutional investors and ranked them in ascending order of the number of hedge funds that have stakes in them, as of Q2 of 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
12 Cheap Chinese Stocks to Buy According to Hedge Funds
12. Autohome Inc. (NYSE:ATHM)
Number of Hedge Fund Holders: 16
Forward P/E Ratio: 12.85
Autohome Inc. (NYSE:ATHM) is a holding firm that runs one of the leading online retail platforms for automobiles. The company has access to a wide customer base and the data is used to generate leads and assist in advertising services. Lead generation services allow Autohome dealer subscribers to create their online stores, while media services assist with marketing solutions in connection with brand promotion, new model releases, and sales promotion. The majority of the operations of the company are in Mainland China.
Based on customer needs, Autohome’s online automobile platform provides accurate and effective customized content and commercial offerings. During Q3 2024, the company’s average mobile daily active users increased by 5.6% year-over-year, crossing 70 million users. Autohome’s new professional content and product mix have strengthened its differentiated competitive advantages, leading to a solid improvement in traffic. The company organized over 500 offline auto shows in low-tier markets which helped in consumer engagement. The company’s initiatives such as “Hundred Cities ‘Trade-in for New’ Car-Buying Festival” bring a competitive edge to the company’s offering in the sector through higher consumer engagement.
In Q3, Autohome Inc. (NYSE:ATHM) improved its revenue by 3.1% year-over-year from the online marketplace and other segments. The company is taking long-term initiatives to continue its dominance in the competitive automobile market in China. Autohome expanded its new retail business into lower-tier cities, introducing a network of over 50 stores in the last quarter. One of the keys to Autohome’s successful initiatives is its collaboration with Ping An Group. The company plans to utilize Ping An Group’s off-line resources and aftermarket service capabilities to have an upper edge in the online auto industry.
11. iQIYI, Inc. (NASDAQ:IQ)
Number of Hedge Fund Holders: 17
Forward P/E Ratio: 7.32
iQIYI, Inc. (NASDAQ:IQ) is China’s leading online entertainment services company that is often referred to as the “Netflix of China.” iQIYI provides original content such as movies, television shows, and a variety of other genres. Some of the well-known shows hosted by the company include The Lost Tomb, The Mystic Nine, Burning Ice, Qipa Talk, and The Rap of China, among others. iQIYI’s over-the-top streaming (OTT) service has a similar business model to Netflix which is subscription-based. The company charges a monthly fee of $6.99 for Standard and $9.99 for Premium offering.
iQIYI has a subscriber base of over 100 million and has more than 400 million monthly active users. iQIYI, Inc. (NASDAQ:IQ) is continuing to expand into new markets to enhance its future growth. The company’s expansion policy has reaped fruits as the annual membership revenue soared notably in markets including Hong Kong and the U.K.
However, the company fell short in the second quarter of 2024 mainly due to fluctuation in iQIYI’s content slate performance. In Q2, the company posted a 5% year-over-year drop in revenue. IQ seems to be a cheap stock as it has a forward P/E of just over 7 and is trading at a discount of almost 38% to its sector median of 14.07%.