In this article, we discuss the 10 Chinese stocks that are rebounding as the crackdown nears end. If you want to read about some more Chinese stocks on the upward trajectory, go directly to These 5 Chinese Stocks are Rebounding as Crackdown Nears End.
Over the past few months, a regulatory crackdown against dual-listed companies by the Chinese stocks has hammered China-based firms in the United States, resulting in a mass hedge fund exodus from Chinese stocks. However, there are signs that the crackdown is now nearing an end. On March 16, official Chinese news agency Xinhua reported that Beijing had decided to keep the stock market stable and support overseas listing of Chinese firms, citing sources from a meeting chaired by Vice Premier Liu He.
Chinese stocks that had been trading in the red in the past few months rallied on the back of the report. The Hang Seng China Enterprises Index, which tracks the performance of dual-listed Chinese firms, jumped over 13% in a single day, the biggest rally it has registered since 2008. Following the pledge, Chinese banks and regulators also vowed to play their role in keeping the market stable. The report comes amid increased concern in the US around Chinese ties to Russia and the impact of these on the US sanctions on Moscow for the Ukraine war.
The CSI 300 Index, the benchmark index in China, also soared by more than 4.3% after the report, the most since July 2020. Investors who are eager to take advantage of this boom and pick up the shares of top Chinese stocks at bargain prices should consider some of the top Chinese stocks that are rebounding as the crackdown nears an end. These include Futu Holdings Limited (NASDAQ:FUTU), 51job, Inc. (NASDAQ:JOBS), and Lufax Holding Ltd (NYSE:LU), among others discussed in detail below.
Our Methodology
The companies that trade on exchanges in the United States but are based in China were selected for the list. The list was further refined by identifying the firms that witnessed an increase in their share price over the past four weeks.
Data from around 900 elite hedge funds tracked by Insider Monkey was used to identify the number of hedge funds that hold stakes in each firm.
Photo by Markus Winkler on Unsplash
These Chinese Stocks are Rebounding as Crackdown Nears End
10. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 115
Increase in Share Price Over Past Month: 4.80%
Alibaba Group Holding Limited (NYSE:BABA) is a diversified technology company. Elite hedge funds hold bullish positions in the stock. Among the hedge funds being tracked by Insider Monkey, 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 $2 billion.
On March 1, Baird analyst Colin Sebastian maintained an Outperform rating on Alibaba Group Holding Limited (NYSE:BABA) stock with a price target of $160, noting that the firm was focused on long-term growth despite near-term headwinds.
Just like Futu Holdings Limited (NASDAQ:FUTU), 51job, Inc. (NASDAQ:JOBS), and Lufax Holding Ltd (NYSE:LU), Alibaba Group Holding Limited (NYSE:BABA) is one of the stocks that hedge funds are monitoring.
In its Q1 2021 investor letter, Polen Capital Management, 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) also detracted from performance as the company continues to remain under regulatory scrutiny from both the Chinese State Administration for Market Regulation on antitrust concerns and the U.S. Securities and Exchange Commission on ADR listing requirements. Despite the regulatory overhang, we believe that Alibaba’s competitive positioning and growth outlook remains intact, even if the company must pay fines or modify some business practices. We viewed the current valuation at <20x next twelve month’s earnings as a compelling opportunity to add to our position. Alibaba Group Holding Limited (NYSE:BABA) is the second largest position in the Portfolio.”
9. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 38
Increase in Share Price Over Past Month: 5.39%
Baidu, Inc. (NASDAQ:BIDU) provides internet search services. On March 3, Susquehanna analyst Shyam Patil kept a Positive rating on the stock and raised the price target to $200 from $175, noting the firm was a top video asset in the Chinese market and a leading player in the internet search segment.
Baidu, Inc. (NASDAQ:BIDU) remains a top internet stock in the finance world. At the end of the fourth quarter of 2021, 38 hedge funds in the database of Insider Monkey held stakes worth $1.4 billion in Baidu, Inc. (NASDAQ:BIDU), compared to 44 in the preceding quarter worth $2 billion.
In its Q1 2021 investor letter, Horos Asset Management, an asset management firm, highlighted a few stocks and Baidu, Inc. (NASDAQ:BIDU) was one of them. Here is what the fund said:
“We have also fully exited our stake in Baidu, Inc. (NASDAQ:BIDU), following their outstanding performance during the period and their lower relative upside potential compared to other investment alternatives, which we will discuss below.
The Chinese technology platform company Baidu, Inc. (NASDAQ:BIDU) has also been held in the portfolios managed by Alejandro, Miguel and myself for several years. During this period, we have seen very high volatility in its share price, which we have taken advantage of to make significant rebalancing moves in our position (in fact, we even sold our entire position once, when we thought the stock’s upside potential was exhausted). After several years of instability, market sentiment turned very positive, putting an end to the historical advertising problems in the healthcare sector, the divestments in O2O (Online-to-Offline) businesses that continued to weigh on the company’s margins, the IPO of part of the iQiyi streaming business (which hid Baidu’s underlying cash generation capacity) and the tough competition from other industry giants such as Tencent and Alibaba, as well as the entry of new players with disruptive business models (ByteDance). At the same time, the company’s recent commitment to electric vehicles contributed even more to this change of narrative. Baidu’s share price rose almost fourfold from the March 2020 lows to all-time highs and reached a valuation where the margin of safety, in our view, was too narrow.”
8. NIO Inc. (NYSE:NIO)
Number of Hedge Fund Holders: 30
Increase in Share Price Over Past Month: 6.40%
NIO Inc. (NYSE:NIO) makes and sells smart electric vehicles. It is one of the favorite EV stocks on Wall Street. At the end of the fourth quarter of 2021, 30 hedge funds in the database of Insider Monkey held stakes worth $813 million in NIO Inc. (NYSE:NIO), the same as in the preceding quarter worth $1.1 billion.
On March 21, Deutsche Bank analyst Edison Yu maintained a Buy rating on NIO Inc. (NYSE:NIO) stock with a price target of $50, underlining that the company had “cultivated an aspirational premium brand” underpinned by a leading service infrastructure that “no domestic automaker has been able to match”.
In its Q2 2020 investor letter, McLain Capital, an asset management firm, highlighted a few stocks and NIO Inc. (NYSE:NIO) was one of them. Here is what the fund said:
“NIO Inc. (NYSE:NIO): It’s stock up 360% since the beginning of June on no news, and one of our more troublesome short positions, NIO Inc. (NYSE:NIO) is valued at a whopping $17bln on trailing revenue of only $1.1bln. In 2019, NIO Inc. (NYSE:NIO) ran a -17% gross margin, a -140% EBITDA margin & burned ~$1.5bln in cash in 2019. NIO Inc. (NYSE:NIO) stock has become one of the most popular stocks among retail traders with approximately 250,000 accounts holding the name just on the popular Robinhood trading platform.”
7. Vipshop Holdings Limited (NYSE:VIPS)
Number of Hedge Fund Holders: 30
Increase in Share Price Over Past Month: 7.73%
Vipshop Holdings Limited (NYSE:VIPS) operates as an online discount retailer. On March 14, JPMorgan analyst Andre Chang kept a Neutral rating on the stock with a price target of $7, highlighting that the valuation of the firm should make the stock more resilient to pressures than Chinese peers in the US marketplace.
Top hedge funds hold large stakes in Vipshop Holdings Limited (NYSE:VIPS). At the end of the fourth quarter of 2021, 30 hedge funds in the database of Insider Monkey held stakes worth $329 million in Vipshop Holdings Limited (NYSE: VIPS), the same as in the preceding quarter worth $560 million.
6. NetEase, Inc. (NASDAQ:NTES)
Number of Hedge Fund Holders: 35
Increase in Share Price Over Past Month: 3.44%
NetEase, Inc. (NASDAQ:NTES) provides interactive home entertainment services. Major hedge funds are bullish on the stock. 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 7.2 million shares worth more than $737 million.
On February 25, investment advisory 86 Research upgraded NetEase upgraded NetEase, Inc. (NASDAQ:NTES) stock to Buy from Hold with a price target of $113. The firm beat market estimates on earnings per share for the fourth quarter of 2021 by $0.52.
Alongside Futu Holdings Limited (NASDAQ:FUTU), 51job, Inc. (NASDAQ:JOBS), and Lufax Holding Ltd (NYSE:LU), NetEase, Inc. (NASDAQ:NTES) is one of the stocks that institutional investors have their eye on.
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Disclosure. None. These 10 Chinese Stocks are Rebounding as Crackdown Nears End is originally published on Insider Monkey.
