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Diamonds in the Rough: 3 Chinese Stocks to Consider
China’s Economic Woes
If you have been paying attention to global markets, it’s no secret that the Chinese economy is struggling. Over the past five years, the Chinese government caused uncertainty and turmoil in its economy by cracking down on big tech stocks such as Alibaba and employing strict “zero COVID” lockdown policies, which crushed the economy. To make matters worse, exports have slowed dramatically while an overbuild of infrastructure has caused a massive housing bubble.
With more than half of Chinese household wealth stuck in real estate, the collapsed housing market has caused an economic meltdown to spread through the Chinese economy like wildfire. Unfortunately, for investors, equities markets have not escaped. In fact, the iShares China ETF,a proxy for large-cap Chinese equities, is still well off of its climactic highs from late 2007!
Finding Opportunity Amidst Crisis
Though struggles remain in Chinese equities, investors may want to consider certain areas of the market, because it offers:
· Diversification: Chinese markets offer a liquid, non-correlated alternative to US equities.
· A Contrarian Investment: Though China’s economy is nowhere near strong, the worst may be in, and markets tend to bottom when bad news hits a fever pitch.
· Mean Reversion Potential: At some point, Chinese equities will recover. Because of the multi-year meltdown they have endured, the mean reversion potential alone might be worth considering.
Stocks to Watch
Despite the multi-year bear market in Chinese equities, 3 stocks are performing well and are likely to continue.
Futu Holdings is a Chinese fintech company that provides a range of online brokerage and wealth management services to retail investors in China and other Asian markets.Despite a weak equity market, FUTU’s quarterly EPS has grown consistently.
Looking ahead, Zacks Consensus Estimates suggest that earnings will grow at a healthy 39.08% clip for full-year 2023.
New Oriental Education is the leading Chinese education company. EDU provides private education services, English language training, career training, online education, and much more. Anyone familiar with Chinese culture understands that education is taken very seriously and is an integral part of life. Because of this, its no surprise that EDU is performing well. EDU earns a best possible Zacks Rank #1 (Strong Buy).
Another sign of strength is EDU’s price and volume action. While the general equities market is stuck near 52-week lows, EDU is trending higher and finding support at its 10-week moving average.
Pinduoduo is a Chinese e-commerce platform that offers a unique and innovative online shopping experience. Unlike traditional e-commerce platforms, PDD is gaining steam by offering group buying (users can form groups with friends and buy in bulk for discounts), “gamified shopping”, and a mobile-first approach. Though PDD was founded well after Alibaba and JD.com, the two largest Chinese e-commerce platforms, PDD is more attractive due to its lightning-fast growth. PDD grew revenue by 54% last quarter (compared to 5% for BABA & -1% for JD). Clearly, PDD’s unique approach is working - because of that, it is the top Chinese e-commerce stock to own.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Investment Ideas feature highlights: Alibaba, iShares China ETF, Futu, New Oriental Education and Pinduoduo
For Immediate Release
Chicago, IL – September 14, 2023 – Today, Zacks Investment Ideas feature highlights Alibaba (BABA - Free Report) , iShares China ETF (FXI - Free Report) , Futu Holdings (FUTU - Free Report) , New Oriental Education (EDU - Free Report) and Pinduoduo (PDD - Free Report) .
Diamonds in the Rough: 3 Chinese Stocks to Consider
China’s Economic Woes
If you have been paying attention to global markets, it’s no secret that the Chinese economy is struggling. Over the past five years, the Chinese government caused uncertainty and turmoil in its economy by cracking down on big tech stocks such as Alibaba and employing strict “zero COVID” lockdown policies, which crushed the economy. To make matters worse, exports have slowed dramatically while an overbuild of infrastructure has caused a massive housing bubble.
With more than half of Chinese household wealth stuck in real estate, the collapsed housing market has caused an economic meltdown to spread through the Chinese economy like wildfire. Unfortunately, for investors, equities markets have not escaped. In fact, the iShares China ETF,a proxy for large-cap Chinese equities, is still well off of its climactic highs from late 2007!
Finding Opportunity Amidst Crisis
Though struggles remain in Chinese equities, investors may want to consider certain areas of the market, because it offers:
· Diversification: Chinese markets offer a liquid, non-correlated alternative to US equities.
· A Contrarian Investment: Though China’s economy is nowhere near strong, the worst may be in, and markets tend to bottom when bad news hits a fever pitch.
· Mean Reversion Potential: At some point, Chinese equities will recover. Because of the multi-year meltdown they have endured, the mean reversion potential alone might be worth considering.
Stocks to Watch
Despite the multi-year bear market in Chinese equities, 3 stocks are performing well and are likely to continue.
Futu Holdings is a Chinese fintech company that provides a range of online brokerage and wealth management services to retail investors in China and other Asian markets.Despite a weak equity market, FUTU’s quarterly EPS has grown consistently.
Looking ahead, Zacks Consensus Estimates suggest that earnings will grow at a healthy 39.08% clip for full-year 2023.
New Oriental Education is the leading Chinese education company. EDU provides private education services, English language training, career training, online education, and much more. Anyone familiar with Chinese culture understands that education is taken very seriously and is an integral part of life. Because of this, its no surprise that EDU is performing well. EDU earns a best possible Zacks Rank #1 (Strong Buy).
Another sign of strength is EDU’s price and volume action. While the general equities market is stuck near 52-week lows, EDU is trending higher and finding support at its 10-week moving average.
Pinduoduo is a Chinese e-commerce platform that offers a unique and innovative online shopping experience. Unlike traditional e-commerce platforms, PDD is gaining steam by offering group buying (users can form groups with friends and buy in bulk for discounts), “gamified shopping”, and a mobile-first approach. Though PDD was founded well after Alibaba and JD.com, the two largest Chinese e-commerce platforms, PDD is more attractive due to its lightning-fast growth. PDD grew revenue by 54% last quarter (compared to 5% for BABA & -1% for JD). Clearly, PDD’s unique approach is working - because of that, it is the top Chinese e-commerce stock to own.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.