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Chinese Equities Showing Signs of Relative Strength
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Domestic equities were the place to be for much of the last decade and beyond. A historic bull market followed the Great Recession, with many individual companies experiencing stellar returns. Domestic companies really flourished and handily outperformed their Asian counterparts. In fact, as we can see below, large-cap U.S. stocks dominated Chinese large-caps since the financial crisis when stocks bottomed in March of 2009.
Image Source: StockCharts
While it’s still too early to call a true top in this ratio, we are beginning to see signs of Chinese equities turning the page on the last 13 years of underperformance. Many Chinese companies (and their stocks) were hit hard due to extensive COVID-19 related measures, along with regulatory and technology crackdowns in recent years. As China continues to lift lockdown restrictions and eases up on some of the more assertive regulations, the Chinese equities that have been hated by investors will soon become loved.
Chinese technology stocks are really starting to show signs of relative strength. As we can see below, the KraneShare CSI China ETF (KWEB - Free Report) bottomed in March relative to domestic technology stocks, and is now up on the year relatively speaking:
Image Source: StockCharts
The KraneShare CSI China ETF tracks the CSI Overseas China Internet Index, which consists of companies whose primary business is focused on internet-related technology. KWEB is showing some bullish divergences and has made a higher high. KWEB contains many tech companies that investors are likely familiar with.
One such company is Baidu (BIDU - Free Report) , a Chinese-language internet search provider based in Beijing. The company offers a host of services such as Baidu App which allows users to access feed services on mobile devices; Baidu Search to access its search capabilities; and Baidu Feed which provides users with a personalized timeline based on their demographics and interests. BIDU also offers various cloud services and solutions, in addition to online marketing services that include pay for performance, auction-based services that allow customers to bid for priority placement of paid sponsored links.
BIDU, a Zacks Rank #1 (Strong Buy) stock, has built an impressive track record in terms of earnings surprises, having exceeded estimates in every quarter for the past five years running. The company most recently delivered first quarter EPS results back in May of $1.77/share, a 132.89% surprise over the $0.76 consensus estimate. BIDU has posted a 52.86% average earnings surprise over the past four quarters.
BIDU is trading undervalued at a 15.96 P/E relative to its industry group (19.73). Make sure to add BIDU to your watchlist if you haven’t already done so, as the stock looks ripe for a period of outperformance.
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Chinese Equities Showing Signs of Relative Strength
Domestic equities were the place to be for much of the last decade and beyond. A historic bull market followed the Great Recession, with many individual companies experiencing stellar returns. Domestic companies really flourished and handily outperformed their Asian counterparts. In fact, as we can see below, large-cap U.S. stocks dominated Chinese large-caps since the financial crisis when stocks bottomed in March of 2009.
Image Source: StockCharts
While it’s still too early to call a true top in this ratio, we are beginning to see signs of Chinese equities turning the page on the last 13 years of underperformance. Many Chinese companies (and their stocks) were hit hard due to extensive COVID-19 related measures, along with regulatory and technology crackdowns in recent years. As China continues to lift lockdown restrictions and eases up on some of the more assertive regulations, the Chinese equities that have been hated by investors will soon become loved.
Chinese technology stocks are really starting to show signs of relative strength. As we can see below, the KraneShare CSI China ETF (KWEB - Free Report) bottomed in March relative to domestic technology stocks, and is now up on the year relatively speaking:
Image Source: StockCharts
The KraneShare CSI China ETF tracks the CSI Overseas China Internet Index, which consists of companies whose primary business is focused on internet-related technology. KWEB is showing some bullish divergences and has made a higher high. KWEB contains many tech companies that investors are likely familiar with.
One such company is Baidu (BIDU - Free Report) , a Chinese-language internet search provider based in Beijing. The company offers a host of services such as Baidu App which allows users to access feed services on mobile devices; Baidu Search to access its search capabilities; and Baidu Feed which provides users with a personalized timeline based on their demographics and interests. BIDU also offers various cloud services and solutions, in addition to online marketing services that include pay for performance, auction-based services that allow customers to bid for priority placement of paid sponsored links.
BIDU, a Zacks Rank #1 (Strong Buy) stock, has built an impressive track record in terms of earnings surprises, having exceeded estimates in every quarter for the past five years running. The company most recently delivered first quarter EPS results back in May of $1.77/share, a 132.89% surprise over the $0.76 consensus estimate. BIDU has posted a 52.86% average earnings surprise over the past four quarters.
BIDU is trading undervalued at a 15.96 P/E relative to its industry group (19.73). Make sure to add BIDU to your watchlist if you haven’t already done so, as the stock looks ripe for a period of outperformance.