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Narrower Loss of Chinese Indexes Lifts Hope: 4 Stocks to Buy

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Ahead of China’s vice commerce minister Wang Shouwen’s trade talks with the United States in late August, the loss in China’s stock markets has narrowed from earlier this month. The Shanghai Composite Index (SCI) and Hang Seng Index (HSI) lost just 18 and 223.5 points, respectively, on Aug 16. These compare with much bigger losses earlier this month. The loss for Aug 15 was 57.7 and 429.3 points for SCI and HSI, respectively.

David Malpass, the U.S. Under Secretary of Treasury for International Affairs, will be holding the trade talks with Shouwen. It’s unclear whether the talks will be held before Aug 23, the day when both countries impose 25% tax on $16 billion worth of each other’s goods.

If the narrower loss of the Chinese indexes is any indication of recovery in trade relationships with the United States, some Chinese stocks, which are fundamentally strong but have beaten down due to the trade war, should perform really well. At least, the optimism should help these stocks recover better than others in the near term.

Before we handpick the stocks, let’s look at the importance of the upcoming trade talks between the two countries.      

Why US-China Trade Talks are Important

The upcoming trade talks between the United States and China are vital because any improvement in trade relationships between the two countries could bring relief to businesses worldwide that are bearing the brunt of the ongoing trade war.

So far, the two nations have targeted each other’s products through a string of tariffs, the first of which were imposed in July. Both nations imposed 25% tax on $34 billion of each other’s goods. While U.S. targeted industrial machinery parts and tech products, China retaliated with taxes on agricultural products.
 
More tariffs, other than the scheduled 25% on Aug 23, will likely follow if the upcoming trade talks don’t go well.

Chinese Stocks are Up for Gain

Since the Chinese indexes are now in a better shape with positive sentiment in the market, one may consider betting on the following beaten-down stocks with top Zacks Rank:

Renesola Ltd. (SOL - Free Report) and its subsidiaries manufacture solar wafers in China. The company carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate of this company hasn’t changed for the current year over the past month.

RYB Education, Inc. (RYB - Free Report) provides educational services and training in China. Over the last 30 days, the Zacks Consensus Estimate of this company’s current-year earnings has been revised 30.7% upward. This company also holds a Zacks Rank #2.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

China Oilfield Services Ltd. provides drilling services, marine support and transportation services, well services and geographical services in offshore China. The company holds a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings hasn’t changed over the last 30 days.
 

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