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China's Service Activity Hits 4-Month High: 4 Top Picks

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China, the world’s second-largest economy, has remained resilient to the recent global economic shocks. Moreover, the strength in the Chinese economy is evident from the fact that despite trade-war-related tensions, China’s service activity managed to notch up a 4-month high last month.

Moreover, business confidence among Chinese entrepreneurs also exhibited an uptick for the ninth straight quarter. Under such encouraging conditions, adding stocks from China seems prudent.

Service Activity in China Gets a Nudge in June

China has been banking on the strength of its service sector ever since it shifted focus toward achieving sustainable economic growth. The reason for this is that a strong service sector within an economy offsets declining profits from heavy industries amid sincere efforts by China’s policymakers to rein in the country’s debt load and abating risks.

Such efforts are evident from the fact that the country’s service activity expanded to its highest level in the last four months. Per the latest report on Jul 4, the Caixin China services purchasing managers' index increased to 53.9% in June from 52.9% in May. Also, any reading above 50 indicates expansion in service activity.

A reading above 50 indicates expansion in activity from the previous month, while a level below that shows contraction. Also, sub-indexes that measure employment and new business climbed moderately in June, hinting at robust demand-supply dynamics. Further, on Jun 30, the official nonmanufacturing PMI of China surged to 55% in June from 54.9% in May.

Business Confidence Among Entrepreneurs Improve Steadily

China’s efforts toward achieving high-quality development amid its resilience to external economic shocks resulted in increased business confidence of the country’s entrepreneurs in China’s economy.

Per the latest report from National Development and Reform Commission (NDRC) on Jul 5, entrepreneur confidence index exhibited growth for nine consecutive quarters, increasing to 75.8% in the first quarter of this year.

Further, the business climate index for the second quarter, increased to 58.5%. The report also stated that despite global economic uncertainties, recovery in the market would continue, paving the way for increased trade. Also, foreign trade rose 8.6% year over year in June.

Moreover, retail sales ticked up by 8.5% last month. Finally, unemployment in urban China declined 0.1% to 4.8% in June.

4 Best Stocks to Buy

Service activity in China remained robust in June, rising to its highest levels since February. Further, an uptick in foreign trade, retail sales amid steadily decreasing unemployment levels have led to increased business confidence among China’s businessmen.

In this context, we have selected four stocks that are expected to gain from China’s economic resilience and prowess. These four stocks flaunt Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ctrip.com International, Ltd. (CTRP - Free Report) is a provider of travel and related services such as accommodation reservation, transportation ticketing, packaged tours, and corporate travel management.

The company is based out of Shanghai and carries a Zacks Rank #1. It has expected earnings growth of 19.81% for the current year. The Zacks Consensus Estimate for the current year has improved 19.8% over the past 60 days.

New Oriental Education & Technology Group Inc. (EDU - Free Report) is a provider of private educational services in China.

The company is based out of Beijing and carries a Zacks Rank #2. The company has expected earnings growth of 34.51% for the current year. The Zacks Consensus Estimate for the current year has improved almost 1% over the past 90 days.

JinkoSolar Holding Co., Ltd. (JKS - Free Report) is a designer and developer of photovoltaic products in China as well as across the globe.

The company is based out of Shangrao and carries a Zacks Rank #2. JinkoSolar has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 74.5% over the past 60 days.

Hollysys Automation Technologies Ltd. (HOLI - Free Report) is a provider of automation and control technologies and products.

The Zacks Rank #2 company based out of Beijing has expected earnings growth of 22.13% for the current year. The Zacks Consensus Estimate for the current year has improved almost 1% over the past 60 days.

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