We recently published a list of 8 Most Promising Chinese Stocks According to Hedge Funds. In this article, we are going to take a look at where Trip.com Group Limited (NASDAQ:TCOM) stands against other most promising Chinese stocks.
China’s New Economic Plan
The Chinese stock market shows compelling signs after announcing that Asia’s largest economy is “fully confident” of achieving its full-year growth target. After reaching the highest levels in over two years at the open, the Heng Seng index closed 9.40% lower in the trading session of October 8. The downward trend during the last trading session recorded the heaviest fall for Heng Seng since 2008. The week-long bull rally was backed by stimulus leading to positive economic sentiment regarding the Chinese full-year growth target, however, the market turned red after officials failed to persuade confidence in economic plans intended to revive the economy.
During the last week of September, the Chinese government unveiled the country’s most comprehensive economic rescue effort since the end of the COVID-19 pandemic. Pan Gongsheng, the governor of the People’s Bank of China, said that commercial banks will soon be advised to lower the interest rate of existing mortgages by nearly 0.5 percentage points on average. In addition, the People’s Bank of China (PBOC) reduced the rate on 300 billion yuan worth of one-year medium-term lending facility (MLF) loans to 2% from 2.30%. The rate cuts are part of the policy framework to effectively influence market borrowing costs and align with global economic activities.
On October 8, Reuters reported that Economic Planner Chairman, Zheng Shanjie pointed out that China is ‘fully confident’ of achieving economic targets for 2024 and would propose 200 billion yuan for investment projects during the next year’s budget plan. The IMF’s revised expected economic growth for China is now 5% for 2024 and 4.5% for 2025.
What are Most Analysts Saying About China’s Economic Plan?
Billionaires such as David Tepper, founder of Appaloosa Management, have expressed bullish sentiment on China, while most analysts are cautious about the potential risks China holds. John Rutledge, Safanad’s Chief Investment Strategist, said that China is trying to reach its 5% growth target but they are not going to make it. Rutledge highlighted some serious issues China is currently facing, especially the real estate crisis. Rutledge further added that pay offers are going down and home prices are down by 5%, the biggest decline since 2015. Chinese President Xi Jinping will continue teasing the investors as they invest their capital and then let them drive away and that’s what they are doing right now, added Rutledge. The Chinese stock market is currently experiencing a similar reaction and that’s what happened with the Heng Seng index on October 8.
China has reduced the down payment ratio for second homes from 25% to 15% as the first home. Pan Gongsheng said the policy is expected to benefit 50 million households and more than 150 million people, leading to a reduction of the nation’s total interest bill by over 150 billion yuan annually. However, analysts are stating that these are tiny measures of a bigger problem that Chinese real estate is facing.
On September 25, VOA reported that a real estate analyst in Taipei told the media outlet that the policy may not help restore confidence for Chinese home-buyers. China’s bigger problem is its deteriorating birth rate. The analyst said that young people who will inherit a house from elders will not invest in the housing market, due to a sluggish economy and not willing to take such a risk. In addition, Francis Lun, CEO of Geo Securities in Hong Kong, pointed out the policies are ‘too late and too few’ but are better than nothing.
Whereas, billionaire David Tepper is excited to make investments in Chinese stocks. In an interview on CNBC on September 26, Tepper stated that he is increasing his exposure to Chinese stocks, considering the stimulus as China plans to float $142 billion of capital into top state-owned banks. Tepper’s take on the new policy to boost the economy is a signal to invest in Chinese markets. As a result, he is “buying everything” related to China.
China’s struggling economy and the government’s effort to stimulate its property market is a move toward balancing its economy. The exposure of investors such as David Tepper to Chinese stocks and ETFs reflects investors’ confidence in a risky market with growth potential. With that in context, let’s take a look at the 8 most promising Chinese stocks according to hedge funds.
Our Methodology
For this article, to compile our list of the most promising Chinese stocks according to hedge funds, we used the Finviz stock screener and shortlisted the top 20 Chinese stocks with the highest market capitalization. From this dataset, we selected the top 8 stocks most favoured by hedge funds and ranked them in ascending order based on the number of hedge funds holding stakes in these firms as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. 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).
A customer in a travel agents office, highlighting the convenience of the companies corporate travel solutions.
Trip.com Group Limited (NASDAQ:TCOM)
Number of Hedge Fund Holders: 52
Trip.com Group Limited (NASDAQ:TCOM) is a leading Chinese online travel agency that offers a wide range of booking services for hotels, transportation, tours, and corporate travel. The company has a significant global presence, with over 30,000 employees based in 95 locations in China and 22 international branches. On September 10, Trip.com reported that it was named the “Fast-Growing Brand” in the Interbrand Best China 2024 list, as the company continues to grow and seek innovation.
Trip.com is shaping the travel industry through its AI-powered solutions and its strategic focus on enhancing the customer journey. On September 4, the company announced a new product matrix for its corporate travel management brand, Trip.Biz. Through AI, Trip.Biz is transforming human-centric technology to deliver All-in-One digital solutions. The updated product matrix includes six core products including, Trip.Biz OBT & App, Trip.Biz Reporting, Trip.Biz Payment, Trip.Biz Desk, Trip.Biz ESG, and Trip.Biz Care.
During the second quarter of 2024, Trip.com Group Limited (NASDAQ:TCOM) reported a revenue of $1.74 billion, surpassing estimates by $8.73 million. The company has grown its net income at a compound annual growth rate (CAGR) of 49.52% over the past five years. This strong growth reflects the company’s dominance and ability to adapt to changing market conditions.
In the last quarter, the company observed that new flight routes have more than doubled search volumes compared to corresponding destinations. Similarly, inbound travel to China has seen remarkable growth in the first half of 2024, a rise of over 150% year-over-year. In Q2 2024, Trip.com’s hotel reservations by Chinese travelers increased by approximately 20% year-over-year, reflecting an enduring interest.
Trip.com Group Limited (NASDAQ:TCOM) is well-established in China and is expanding its international operations, which offer significant growth prospects. According to Mordor Intelligence, China’s tourism and hotel market is anticipated to grow at a CAGR of 5.53% from 2024 to 2029, reaching a value of $504.22 billion. The increasing tourism and hotel market shows that Trip.com has a large market to capture and the company is yet to benefit from this increasing market.
Overall, TCOM ranks 4th on our list of most promising Chinese stocks according to hedge funds. While we acknowledge the potential of TCOM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TCOM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.