In this article, we discuss the 5 Chinese stocks to avoid amid economic slowdown. If you want to read about some Chinese stocks, go directly to 10 Chinese Stocks to Avoid Amid Economic Slowdown.
5. NetEase, Inc. (NASDAQ:NTES)
Number of Hedge Fund Holders: 26
NetEase, Inc. (NASDAQ:NTES) provides online services focusing on diverse content, community, communication, and commerce in China. The stock has climbed recently on the back of reports that authorities in China had approved a mobile game developed by the company. This is the first approval for a mobile game by the government in Beijing since late July 2021. Since that time, Beijing has been tightening control over gaming and tech stocks in the country. The company is on the list of Chinese stocks to avoid amid economic slowdown as value stocks become more attractive investments.
On September 7, JPMorgan analyst Daniel Chen downgraded NetEase, Inc. (NASDAQ:NTES) stock to Neutral from Overweight and lowered the price target to $90 from $120, backing the firm to deliver long-term growth to investors.
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 3.67 million shares worth more than $342 million.
4. KE Holdings Inc. (NYSE:BEKE)
Number of Hedge Fund Holders: 37
KE Holdings Inc. (NYSE:BEKE) engages in operating an integrated online and offline platform for housing transactions and services in China. On August 23, the company posted earnings for the second quarter of 2022, reporting losses per share of $0.08, beating market estimates by $0.13. The revenue over the period was $2.1 billion, down over 43% compared to the revenue over the same period last year and missing analyst estimates by $510 million. The firm also said that it expected total net revenues to be around $2.5 billion, representing a decrease of approximately 6.1% to 8.8% from 2021. The company is on the list of Chinese stocks to avoid amid economic slowdown.
On August 25, Barclays analyst Jiong Shao maintained an Overweight rating on KE Holdings Inc. (NYSE:BEKE) stock and raised the price target to $26 from $24, appreciating the earnings report of the firm for the second quarter of 2022.
At the end of the second quarter of 2022, 37 hedge funds in the database of Insider Monkey held stakes worth $1.6 billion in KE Holdings Inc. (NYSE:BEKE), compared to 34 in the preceding quarter worth $882.8 million.
In its Q3 2021 investor letter, Tao Value, an asset management firm, highlighted a few stocks and KE Holdings Inc. (NYSE:BEKE) was one of them. Here is what the fund said:
“As witnessed in the past quarter, the government intervention in 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 exited KE Holdings Inc. (NYSE:BEKE), for high potential regulatory risk and the passing of the visionary founder & CEO Zuo Hui (who was a core tenet of our original thesis).”
3. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 45
Baidu, Inc. (NASDAQ:BIDU) offers internet search services in China. On August 30, the company posted earnings for the second quarter of 2022, reporting earnings per share of $2.36, beating market estimates by $0.79. The revenue over the period was $4.4 billion, down more than 5% compared to the revenue over the same period last year and missing analyst estimates by $230 million. The firm also said that the adjusted EBITDA over the time was $1.05 billion and the adjusted EBITDA margin was 24%. The company is on the list of Chinese stocks to avoid amid economic slowdown as growth stocks take a battering amid inflation.
On September 16, UBS analyst Wei Xiong initiated coverage of Baidu, Inc. (NASDAQ:BIDU) stock with a Buy rating and a price target of HK$191.30, noting that the risk/reward profile of the shares appeared attractive for investors.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Ariel Investment is a leading shareholder in Baidu, Inc. (NASDAQ:BIDU), with 2.6 million shares worth more than $393 million.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Baidu, Inc. (NASDAQ:BIDU) was one of them. Here is what the fund said:
“Baidu, Inc. (NASDAQ:BIDU), a leading Chinese artificial intelligence company, contributed to performance in the second quarter due to an improving outlook for its mobile ecosystem, continued market share gains in cloud computing, solid progress in autonomous vehicle development, and improving operational efficiency. We see significant upside for Baidu, given its strong competitive position across several of China’s key growth industries.”
2. JD.com, Inc. (NASDAQ:JD)
Number of Hedge Fund Holders: 62
JD.com, Inc. (NASDAQ:JD) provides supply chain-based technologies and services in China. In late August, news agency Reuters reported that the company was among the first batch of Chinese tech giants that the US would target in a bid to gain access to the accounting records of the firm. The move comes after the US government introduced new laws that require Chinese firms trading in the US to comply with certain transparency standards that they had not been following previously. The company is on the list of Chinese stocks to avoid amid economic slowdown as investors turn towards value stocks.
On September 12, Susquehanna analyst Shyam Patil maintained a Neutral rating on JD.com, Inc. (NASDAQ:JD) stock and increased the price target to $62 from $55, noting that the second quarter earnings of the firm were solid despite macro headwinds.
At the end of the second quarter of 2022, 62 hedge funds in the database of Insider Monkey held stakes worth $5.5 billion in JD.com, Inc. (NASDAQ:JD), compared to 59 in the previous quarter worth $5.4 billion.
In its Q3 2021 investor letter, Argosy Investors, an asset management firm, highlighted a few stocks and JD.com, Inc. (NASDAQ:JD) was one of them. Here is what the fund said:
“We sold JD.com, Inc. (NASDAQ:JD) as a result of the furor over Chinese stocks during the quarter. We had been concerned about China’s lack of respect for investor rights for some time, and Beijing has become significantly more aggressive in asserting itself of late. In addition, the legal structure Chinese companies use to come public in the U.S., a Cayman Islands shell corporation leaves American investors with an unsure path to recovering value should these companies cease to trade on U.S. exchanges. Because of the uncertainty, we exited our position in JD completely. We still love JD’s long-term prospects, but we cannot estimate the legal/regulatory risk associated with these companies anymore. More broadly, we are freeing up cash for some other positions we already own which have declined in this market, and after additional review, remain attractive.”
1. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 106
Alibaba Group Holding Limited (NYSE:BABA), through its subsidiaries, provides technology infrastructure and marketing reach to help merchants, brands, retailers, and other businesses. Amid fears of an economic slowdown in China, the company is facing regulatory pressures from the US governments as well. These pressures are expected to continue to impact the firm despite the Chinese government injecting $146 billion into the economy and reaching an audit agreement with the US. The company is on the list of Chinese stocks to avoid amid economic slowdown.
On August 8, Deutsche Bank analyst Leo Chiang maintained a Buy rating on Alibaba Group Holding Limited (NYSE:BABA) stock and raised the price target to $160 from $155, appreciating the second quarter earnings beat of the firm.
Among the hedge funds being tracked by Insider Monkey, Camas, Washington-based investment firm Fisher Asset Management is a leading shareholder in Alibaba Group Holding Limited (NYSE:BABA), with 14 million shares worth more than $1.6 billion.
In its Q2 2022 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Alibaba Group Holding Limited (NYSE:BABA) was one of them. Here is what the fund said:
“Alibaba Group Holding Limited(NYSE:BABA) is the largest retailer and e-commerce company in China. Alibaba operates shopping platforms Taobao and Tmall and owns 33% of Ant Group, which operates Alipay, China’s largest third party online payment provider. Shares of Alibaba rose during the quarter, driven by an increasing focus on improving capital allocation, an improving regulatory environment, and government stimulus targeting Chinese consumers. We retain conviction that Alibaba will benefit from rapid growth in cloud services, logistics, and retail.”
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