13 Best Chinese Stocks To Buy Right Now

Published on February 21, 2024 at 2:27 pm by Hamna Asim in Hedge Funds, News

In this article, we discuss 13 best Chinese stocks to buy now. If you want to skip our discussion on the Chinese economy, head over to 5 Best Chinese Stocks To Buy Right Now.

The Chinese economy, once expected to quickly recover in 2023 and continue as a global growth engine, has experienced a slowdown, being labeled a “drag” on world output by the International Monetary Fund (IMF). Despite challenges like a property crisis, weak spending, and high youth unemployment, China achieved its official growth target of around 5% for 2023. However, this is below the pre-COVID annual growth average of 6%, and concerns are rising about 2024 and the possibility of decades of stagnation without significant market reforms. The risk of falling into the “Middle Income Trap,” where emerging economies struggle to reach high-income status, is highlighted by Derek Scissors of the American Enterprise Institute, a center-right think tank.

Major international investment banks, including Goldman Sachs and Morgan Stanley, anticipate a slower growth rate for China’s economy in 2024 compared to the previous year. The average prediction among these banks suggests a 4.6% increase in real GDP for 2024, down from the expected 5.2% growth in 2023. According to Haibin Zhu, JPMorgan’s Chief China Economist and Head of Greater China Economic Research, and his team:

“An important task in 2024 is to manage the downside risk in the economy, particularly from the housing market correction and its spillover risks. Deflation pressure will likely fade in 2024, with the turnaround in global commodity prices and domestic pork prices, but low inflation will stay along with insufficient domestic demand.”

Similarly, Goldman Sachs analysts expressed their views in their 2024 outlook:

“The Chinese economy did not follow the script in 2023. Overall, we expect macro policy to ease notably [in 2024], particularly by the central government, in order to support the economy and to prevent real GDP growth from decelerating too much from 2023 to 2024.”

UBS analysts suggest that there is still room for growth in China, particularly in the continued migration of workers from rural to urban areas, along with investments in manufacturing, services, and renewable energy. Despite a growth rate of 3% to 4%, China’s economic expansion continues to outpace that of developed economies.

During the Lunar New Year holiday this year, China experienced a notable increase in travel activity and spending, surpassing levels seen before the pandemic. Ministry of Culture and Tourism data revealed a 34.3% year-over-year rise in domestic trips, reaching 474 million, and a 47.3% increase in spending on domestic holiday trips, amounting to nearly 632.7 billion yuan ($87.95 billion). China Central Television, citing the ministry, reported a 19% increase in domestic trips and a 7.7% rise in spending compared to the same period in 2019. This positive data is particularly significant as Chinese policymakers are actively working to stimulate domestic consumption amidst deflationary pressures. During the holidays, the Chinese mainland experienced 3.6 million tourist departures and 3.23 million tourist arrivals. Mutual visa-free travel agreements with certain countries contributed to the recovery in both outbound and inbound travel. The Lunar New Year is considered a crucial metric for assessing consumer appetite in China, being the country’s most important holiday.

In its most recent monetary policy statement, the People’s Bank of China reduced the benchmark 5-year loan prime rate by 25 basis points. Many analysts interpreted this action as an attempt to support the challenged property market in the country, given that a significant portion of mortgages is linked to this rate. A more stable housing sector is considered crucial for achieving overall economic stability.

Amid the current challenges faced by the world’s second-largest economy, it could be a good idea to buy Chinese stocks now to reap the rewards later. Some of the best Chinese stocks to buy include Alibaba Group Holding Limited (NYSE:BABA), JD.com, Inc. (NASDAQ:JD), and Baidu, Inc. (NASDAQ:BIDU).

Our Methodology

We chose the top Chinese stocks based on overall hedge fund sentiment toward each stock. We have assessed the hedge fund sentiment from Insider Monkey’s database of 933 elite hedge funds tracked as of the end of the fourth quarter of 2023. The list is arranged in ascending order of the number of hedge fund holders in each firm. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here).

Photo by David Veksler on Unsplash

Best Chinese Stocks To Buy Right Now

13. Kanzhun Limited (NASDAQ:BZ)

Number of Hedge Fund Holders: 26

Kanzhun Limited (NASDAQ:BZ) is a Chinese company that provides online recruitment solutions through its mobile app, BOSS Zhipin. Established in 2013 and based in Beijing, the company facilitates the hiring process by connecting job seekers with employers in China. On November 14, Kanzhun Limited (NASDAQ:BZ) reported a Q3 non-GAAP EPADS of $0.22 and a revenue of $220.2 million, beating Wall Street estimates by $0.08 and $7.34 million, respectively. Revenue for the period increased 36.3% on a year-over-year basis.

According to Insider Monkey’s fourth quarter database, 26 hedge funds were bullish on Kanzhun Limited (NASDAQ:BZ), compared to 18 funds in the prior quarter. Tiger Pacific Capital is the largest stakeholder of the company, with 2.50 million shares worth $41.6 million.

Like Alibaba Group Holding Limited (NYSE:BABA), JD.com, Inc. (NASDAQ:JD), and Baidu, Inc. (NASDAQ:BIDU), Kanzhun Limited (NASDAQ:BZ) is one of the best Chinese stocks to monitor.

12. H World Group Limited (NASDAQ:HTHT)

Number of Hedge Fund Holders: 31

H World Group Limited (NASDAQ:HTHT) is a company based in Shanghai, China, and its subsidiaries are involved in the development and operation of hotels. The company manages leased, owned, and franchised hotels across China, operating under brand names such as HanTing Hotel, Ni Hao Hotel, Hi Inn, and Elan Hotel, to name a few. H World Group Limited (NASDAQ:HTHT) is one of the best Chinese stocks to invest in.

On January 22, H World Group Limited (NASDAQ:HTHT) announced that its Legacy-Huazhu business experienced a RevPAR (revenue per available room) recovery in the fourth quarter of 2023, reaching 120% of the 2019 level. This rebound was fueled by the ongoing resurgence in both leisure and business travel demand.

According to Insider Monkey’s fourth quarter database, 31 hedge funds were bullish on H World Group Limited (NASDAQ:HTHT), compared to 28 funds in the prior quarter.

11. Li Auto Inc. (NASDAQ:LI)

Number of Hedge Fund Holders: 31

Li Auto Inc. (NASDAQ:LI), based in Beijing, China, specializes in designing, developing, manufacturing, and selling new energy vehicles. Li Auto’s product lineup includes the Li ONE and Li L series smart electric vehicles. It is one of the best Chinese stocks to buy.

Li Auto Inc. (NASDAQ:LI) reported delivering 31,165 vehicles in January 2024, marking a significant 105.8% year-over-year increase. The cumulative deliveries of vehicles reached 664,529 by the end of January 2024. The company’s chairman and CEO, Xiang Li, commented that Li Auto will see unprecedented growth in 2024. The company plans to introduce a portfolio of eight competitive models, including four EREVs (extended-range electric vehicles) and four BEVs (battery electric vehicles), to meet evolving user demands. Additionally, the company aims to increase investment in research and development, focusing on autonomous driving, smart space, and smart electrification technologies.

According to Insider Monkey’s fourth quarter database, John Overdeck and David Siegel’s Two Sigma Advisors is the largest stakeholder of Li Auto Inc. (NASDAQ:LI), with 6.1 million shares worth $228.8 million. Overall, 31 hedge funds were bullish on the stock.

10. Vipshop Holdings Limited (NYSE:VIPS)

Number of Hedge Fund Holders: 32

Vipshop Holdings Limited (NYSE:VIPS) operates online platforms in China, offering a wide range of products, including clothing, accessories, beauty products, home goods, and supermarket items. Vipshop Holdings Limited (NYSE:VIPS) is one of the top Chinese stocks to consider buying.

On November 15, 2023, Citi upgraded Vipshop Holdings Limited (NYSE:VIPS) stock from Neutral to Buy, driven by the company’s Q3 performance and management’s positive outlook for 2024. The price target was increased from $18 to $20. Analyst Alicia Yap acknowledged that Vipshop’s Q3 results surpassed both Citi and Wall Street estimates, despite Q4 estimates being lower than anticipated. However, the optimistic outlook for 2024 is based on Vipshop Holdings Limited (NYSE:VIPS)’s potential for expanding its user base, enhancing merchandise selection, and maintaining operational efficiency, which is expected to contribute to a gradual improvement in margin and profit.

According to Insider Monkey’s fourth quarter database, 32 hedge funds held stakes in Vipshop Holdings Limited (NYSE:VIPS), compared to 30 funds in the last quarter. William B. Gray’s Orbis Investment Management is the largest stakeholder of the company, with 4.90 million shares worth $87 million.

Here is what Oakmark Fund has to say about Vipshop Holdings Limited (NYSE:VIPS) in its Q3 2021 investor letter:

“Vipshop Holdings ADR (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.”

9. TAL Education Group (NYSE:TAL)

Number of Hedge Fund Holders: 32

TAL Education Group (NYSE:TAL), based in Beijing, China, specializes in providing after-school tutoring services for K-12 students. On January 25, JP Morgan upgraded TAL Education Group (NYSE:TAL) stock from Neutral to Overweight, expressing strong optimism about the company’s fast growth prospects. The bank raised the price target from $10 to $15. This upgrade is influenced by a positive trend in the tutoring business, following strong performance and guidance from New Oriental Education for the November quarter. JP Morgan analysts anticipate TAL’s exceptional growth to continue, raising revenue forecasts for the next three years by an average of 30%, reaching Street highs. The analysts believe TAL’s supernormal growth has become the new normal, and the company’s earnings power is expected to surprise the market for years to come.

According to Insider Monkey’s fourth quarter database, 32 hedge funds were long TAL Education Group (NYSE:TAL), compared to 25 funds in the prior quarter.

Here is what Tao Value has to say about TAL Education Group (NYSE:TAL) in its Q4 2021 investor letter:

“Looking at the value destruction, TAL Education (TAL) is one of the most painful losses. Although the company is part of the “Mindful Compounder” bucket, it impaired by 95%. If anything, it is a heavy price paid for learning that stock returns are driven by more than business and market factors, but also societal factors. I personally think having 4 out of the 5 top value destructions being recently started position in Chinese stocks is a bit biased, as the market may have overreacted the most to anything China-related recently.”

8. NetEase, Inc. (NASDAQ:NTES)

Number of Hedge Fund Holders: 36

Next on our list of the best Chinese stocks is NetEase, Inc. (NASDAQ:NTES), an operator of online businesses including games, music streaming, intelligent learning services, and internet content services in China and globally. On November 16, NetEase, Inc. (NASDAQ:NTES) reported a Q3 non-GAAP EPADS of $1.84, beating Wall Street estimates by $0.37. The revenue increased 11.6% year-over-year to $3.7 billion. However, it fell short of market consensus by $80 million.

According to Insider Monkey’s fourth quarter database, 36 hedge funds were bullish on NetEase, Inc. (NASDAQ:NTES), compared to 25 funds in the last quarter. Larry Chen and Terry Zhang’s Tairen Capital is the leading position holder in the company, with 1.76 million shares worth $164.3 million.

7. New Oriental Education & Technology Group Inc. (NYSE:EDU)

Number of Hedge Fund Holders: 39

New Oriental Education & Technology Group Inc. (NYSE:EDU) provides private educational services in China under the New Oriental brand. New Oriental Education & Technology Group Inc. (NYSE:EDU) operates through four segments – Educational Services, Online Education, Overseas Study Consulting, and Educational Materials, offering test preparation courses, non-academic tutoring, and intelligent learning systems. It is one of the best Chinese stocks to invest in.

On January 24, New Oriental Education & Technology Group Inc. (NYSE:EDU) reported earnings for the second quarter of fiscal year 2024. The non-GAAP EPADS of $0.29 and revenue of $869.6 million exceeded Wall Street forecasts by $0.01 and $58.28 million, respectively.

According to Insider Monkey’s fourth quarter database, 39 hedge funds were bullish on New Oriental Education & Technology Group Inc. (NYSE:EDU), compared to 34 funds in the last quarter. Liu Xuan’s Keystone Investors is the leading stakeholder of the company, with a position worth $104.75 million.

Ariel Global Fund made the following comment about New Oriental Education & Technology Group Inc. (NYSE:EDU) in its Q2 2023 investor letter:

“We added a new investment position inNew Oriental Education & Technology Group Inc. (NYSE:EDU), a leading after school tutoring program in China. Although the Chinese government banned K-12 academic after school tutoring, the company was able to leverage its expertise in course content quality control and standardized tutoring processes to quickly reposition itself as a leader of non-academic after school tutoring. Furthermore, we anticipate the company’s strong brand and the entrepreneurial acumen of its founder, Michael Yu, will create additional opportunities for expansion as a comprehensive educational service provider.”

6. KE Holdings Inc. (NYSE:BEKE)

Number of Hedge Fund Holders: 39

KE Holdings Inc. (NYSE:BEKE) operates an integrated online and offline platform for housing transactions and services in China. The company, founded in 2001 and headquartered in Beijing, operates through four segments – Existing Home Transaction Services, New Home Transaction Services, Home Renovation and Furnishing, and Emerging and Other Services.

KE Holdings Inc. (NYSE:BEKE) expects total net revenue for the fourth quarter of 2023 to range from RMB18.0 billion ($2.47 billion) to RMB18.5 billion ($2.54 billion). This projection reflects an estimated growth of approximately 7.5% to 10.5% compared to the same quarter in 2022. The forecast takes into account the potential influence of recent real estate-related policies and measures, the effects of which remain uncertain and may impact the company’s operations.

According to Insider Monkey’s fourth quarter database, 39 hedge funds were bullish on KE Holdings Inc. (NYSE:BEKE), compared to 37 funds in the last quarter. Lei Zhang’s Hillhouse Capital Management is the leading stakeholder of the company, with a position worth $473.7 million.

In addition to Alibaba Group Holding Limited (NYSE:BABA), JD.com, Inc. (NASDAQ:JD), and Baidu, Inc. (NASDAQ:BIDU), KE Holdings Inc. (NYSE:BEKE) ranks 6th on our list of the best Chinese stocks.

Artisan Developing World Fund made the following comment about KE Holdings Inc. (NYSE:BEKE) in its second quarter 2023 investor letter:

“Bottom contributors to performance for the quarter included real estate platform KE Holdings Inc. (NYSE:BEKE). Beike fell due to weaker industry property sales in China in April following the release of strong pent-up demand in Q1, despite accelerating revenue and very modest cost growth.”

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