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3 Stocks to Consider for a Rebound Among Chinese Equities
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Although Chinese equities have continued to fall over the last month, China is the second-largest economy by nominal GDP and is considered the world’s largest economy by purchasing power parity (PPP).
Broader economic concerns including higher global inflation and a liquidity crunch in China's property sector may be overdone and there could be a sharp rebound among Chinese stocks on the horizon.
According to the International Monetary Fund, China’s inflation rate has only risen by 0.7% this year compared to 4.1% in the United States. Furthermore, with a total GDP of over $17.9 trillion at the end of 2022, China’s 5% GDP growth this year is above the U.S. at 2.1%.
The softer inflationary environment could evenutally propel several Zacks Internet-Services Industry stocks that operate in China and here are a few to consider.
One Chinese stock that certainly looks poised for a rebound among the Zacks Internet-Services Industry is Tencent Holdings which is an internet services portal. Tencent provides a variety of internet services including value-added internet, mobile, and telecom services along with online advertising.
Some of Tencent’s leading internet platforms also have a commanding presence in China’s gaming industry. Expecting high double-digit EPS growth in fiscal 2023 and FY24, Tencent’s total sales are forecasted to rise 3% this year and climb another 12% next year to $94.61 billion.
Considering its massive presence in China, the risk to reward has become favorable to invest in Tencent near its 52-week lows at around $39 a share. To that point, annual earnings estimates for both FY23 and FY24 are nicely up over the last 30 days correlating with Tencent’s stock coveting a Zacks Rank #1 (Strong Buy).
Another Chinese internet stock seeing expansive EPS growth is JOYY Inc which provides a social media platform in the People’s Republic. Similar to TikTok, JOYY provides short-form video content and live streaming among other peer-to-peer interactions.
Unlike many oversold Chinese stocks, JOYY is only 12% from its 52-week highs at $37 a share. JOYY’s emergence as a popular and very profitable social media company has sustained its stock with annual earnings now forecasted to pop 50% in FY23 at $3.81 per share versus $2.54 a share last year. Plus, FY24 EPS is expected to expand another 5% to $3.99 per share.
Comparable to Alphabet’s (GOOGL - Free Report) Google, Baidu is China's leading search provider that has seen its shares fall closer to their 52-week lows at around $113.
Mostly tied to broader economic concerns and fears of tighter regulations among big tech companies in China, there may still be better buying opportunities ahead. Still, Baidu is expecting high double-digit EPS growth over the next two years and total sales are forecasted to be up 4% this year and rise another 9% next year to $20.75 billion. More intriguing, Baidu’s P/E valuation has become very reasonable at 10.1X forward earnings.
Image Source: Zacks Investment Research
Bottom Line
Chinese equities will most likely be poised for a sharp rebound at some point and these Zacks Internet-Services stocks may be a way to capitalize on the resurgence. At the moment, the Zacks Internet-Services Industry is in the top 17% of over 250 Zacks industries and companies like Tencent, JOYY, and Baidu should remain viable long-term investments as internet usage continues to expand in China.
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3 Stocks to Consider for a Rebound Among Chinese Equities
Although Chinese equities have continued to fall over the last month, China is the second-largest economy by nominal GDP and is considered the world’s largest economy by purchasing power parity (PPP).
Broader economic concerns including higher global inflation and a liquidity crunch in China's property sector may be overdone and there could be a sharp rebound among Chinese stocks on the horizon.
According to the International Monetary Fund, China’s inflation rate has only risen by 0.7% this year compared to 4.1% in the United States. Furthermore, with a total GDP of over $17.9 trillion at the end of 2022, China’s 5% GDP growth this year is above the U.S. at 2.1%.
The softer inflationary environment could evenutally propel several Zacks Internet-Services Industry stocks that operate in China and here are a few to consider.
Image Source: International Monetary Fund
Tencent (TCEHY - Free Report) - Zacks Rank #1 (Strong Buy)
One Chinese stock that certainly looks poised for a rebound among the Zacks Internet-Services Industry is Tencent Holdings which is an internet services portal. Tencent provides a variety of internet services including value-added internet, mobile, and telecom services along with online advertising.
Some of Tencent’s leading internet platforms also have a commanding presence in China’s gaming industry. Expecting high double-digit EPS growth in fiscal 2023 and FY24, Tencent’s total sales are forecasted to rise 3% this year and climb another 12% next year to $94.61 billion.
Considering its massive presence in China, the risk to reward has become favorable to invest in Tencent near its 52-week lows at around $39 a share. To that point, annual earnings estimates for both FY23 and FY24 are nicely up over the last 30 days correlating with Tencent’s stock coveting a Zacks Rank #1 (Strong Buy).
Image Source: Zacks Investment Research
JOYY (YY - Free Report) - Zacks Rank #2 (Buy)
Another Chinese internet stock seeing expansive EPS growth is JOYY Inc which provides a social media platform in the People’s Republic. Similar to TikTok, JOYY provides short-form video content and live streaming among other peer-to-peer interactions.
Unlike many oversold Chinese stocks, JOYY is only 12% from its 52-week highs at $37 a share. JOYY’s emergence as a popular and very profitable social media company has sustained its stock with annual earnings now forecasted to pop 50% in FY23 at $3.81 per share versus $2.54 a share last year. Plus, FY24 EPS is expected to expand another 5% to $3.99 per share.
Image Source: Zacks Investment Research
Baidu (BIDU - Free Report) - Zacks Rank #3 (Hold)
Comparable to Alphabet’s (GOOGL - Free Report) Google, Baidu is China's leading search provider that has seen its shares fall closer to their 52-week lows at around $113.
Mostly tied to broader economic concerns and fears of tighter regulations among big tech companies in China, there may still be better buying opportunities ahead. Still, Baidu is expecting high double-digit EPS growth over the next two years and total sales are forecasted to be up 4% this year and rise another 9% next year to $20.75 billion. More intriguing, Baidu’s P/E valuation has become very reasonable at 10.1X forward earnings.
Image Source: Zacks Investment Research
Bottom Line
Chinese equities will most likely be poised for a sharp rebound at some point and these Zacks Internet-Services stocks may be a way to capitalize on the resurgence. At the moment, the Zacks Internet-Services Industry is in the top 17% of over 250 Zacks industries and companies like Tencent, JOYY, and Baidu should remain viable long-term investments as internet usage continues to expand in China.