Hundreds of Chinese companies are listed on U.S. markets. But which are the best Chinese stocks to buy or watch right now? Among the best are JD.com (JD), NetEase (NTES), Li Auto (LI), Xpeng (XPEV) and BYD Co. (BYDDF).
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China is the world’s most-populous nation and the second-largest economy, with a booming urban middle class and amazing entrepreneurial activity. Dozens of Chinese stocks are often among the top performers at any given time, across an array of sectors.
Covid Shutdowns
Shanghai essentially ended its lockdowns on June 1, after months of restricting people to their homes. Beijing, which didn’t go into full lockdown, eased restrictions on June 6.
But rising cases in early July spurred a revival of mass testing Shanghai and a one-week lockdown in the northwest city of Xi’an.
China’s shutdowns, notably in Shanghai, have taken a massive toll on production, supply chains and spending. China EV sales for Li Auto, Xpeng and Nio (NIO) plunged in April but by June had hit pre-lockdown or record levels.
EV giant BYD, benefiting from in-house chips and batteries, reported its fourth straight record month of sales above 100,000.
Several local governments are providing new subsidies for EV or hybrid sales, including Shenzhen and Shanghai. The Chinese government will encourage affordable EV and hybrid sales in rural areas.
Several EV makers, including BYD and Li Auto, plan new model unveilings or deliveries in the new few weeks.
Regulatory Hopes
China in recent weeks has suggested that a broad crackdown on internet platforms will finally be easing. However, Beijing has given similar signals over the past year, only to intensify strict measures, oversight and penalties.
U.S. and Chinese regulators appear to be trying to find a resolution on U.S. accounting oversight of Chinese firms listed in the U.S. But while Chinese regulators signal a deal is close, their U.S. counterparts stress significant concerns remain. The SEC continues to add Chinese companies that are in danger of delisting. JD.com, Nio and Xpeng were added to that list on May 4.
Best Chinese Stocks Across Many Industries
As the world’s largest internet market, it’s no surprise to see big growth from China stocks focusing on e-commerce, messaging or mobile gaming. Notable Chinese internet stocks include:
In electric vehicles, several Chinese companies are becoming serious rivals to Tesla (TSLA) in the world’s biggest auto market.
Several Chinese financial firms or brokerages are listed in the U.S.
Several China stocks are in solar power.
For-profit education Chinese stocks are a notable nontech sector.
- New Oriental Education (EDU)
- TAL Education (TAL)
- 17 Education & Technology Group (YQ)
- Gaotu Techedu (GOTU), formerly known as GSX Techedu.
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China Stock Investing Via ETFs
One way to minimize individual China stock risks is via ETFs. Another advantage of buying ETFs is that a growing number of Chinese companies are listing in Hong Kong or Shanghai, instead of or in addition to the U.S.
KraneShares CSI China Internet ETF (KWEB) tracks major Chinese internet companies. Many Chinese stock holdings in the KWEB ETF are U.S. listed or traded, such as Alibaba stock, JD.com, Tencent, Pinduoduo and Bilibili, but KWEB also holds companies listed on Chinese markets. Direxion Daily FTSE China Bull (YINN) is a three-times-leveraged ETF of the 50 largest companies listed in Hong Kong, including Alibaba, JD.com and Tencent stock, but its biggest weights are in financials. (The Direxion Daily FTSE China Bear (YANN) is a three-times-leveraged ETF shorting Hong Kong’s biggest companies.)
Stock Market Trend Key
As always, investors should be following the overall stock market trend, adding exposure in confirmed uptrends and paring exposure or going fully to cash in corrections or bear markets. Right now the stock market is in a confirmed uptrend, but the rally is “under pressure.” More broadly, the market has been in a steep downtrend in 2022.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live.
Best China Stocks To Buy: Key Ingredients
Focus on the best stocks to buy and watch, not just any Chinese company.
IBD’s CAN SLIM Investing System has a proven track record of significantly outperforming the S&P 500. Outdoing this industry benchmark is key to generating exceptional returns over the long term.
Look for companies that have new, game-changing products and services. Invest in stocks with recent quarterly and annual earnings growth of at least 25%.
Start with companies with strong earnings growth, such as Pinduoduo. If they’re not profitable, at least look for rapid revenue growth as with Xpeng. The best China stocks should have strong technicals, including superior price performance over time. But we’ll be highlighting stocks that are near proper buy points from bullish bases or rebounds from key levels.
Chinese stocks are starting to outperform.
Why This IBD Tool Simplifies The Search For Top Stocks
Best Chinese Stocks To Buy Or Watch
| Company | Ticker | Industry Group | Composite Rating |
|---|---|---|---|
| Li Auto | LI | Auto Manufacturers | 95 |
| NetEase | NTES | Computer-Software Gaming | 90 |
| BYD | BYDDF | Auto Manufacturers | n.a. |
| JD.com | JD | Retail-Internet | 83 |
| Xpeng | XPEV | Auto Manufacturers | 42 |
So let’s analyze these five top China stocks: Li Auto stock, NetEase stock, BYD stock, Xpeng stock and JD.com stock.
Li Auto Stock
Li Auto is one of several Chinese electric-vehicle makers that trade in the U.S., competing with each other and Tesla (TSLA).
The automaker delivered 13,024 Li One hybrid SUVs in June, up 13.3% from 11,496 vehicles in May and up 68.9% vs. a year earlier. That was the highest monthly sales since last December.
Q2 deliveries were 28,687, up 63.2% vs. a year earlier, but down 9.55% from Q1. Still, that was well above Li Auto’s prior target range of 21,000-24,000 units.
The more-upscale L9 hybrid SUV will begin deliveries in late August, with Li Auto predicting 10,000 deliveries in September.
Shares sold off hard in March to their lowest levels since last May. Li stock bounced following Q1 earnings on May 10. Shares reclaimed their 50-day line in late May. LI stock recently gapped above its 200-day line and then kept running.
On the heels of the L9 reveal and new EV subsidy signals, Li Auto stock broke out past a 37.55 buy point from a deep, six-month consolidation, hitting their best levels since November 2020.
Shares fell in the week ended July 1, but above the buy point. As of July 6, LI stock fell back to in buy range.
Arguably, Li Auto has formed a high handle to an even-longer consolidation, going back to November 2020. Ideally, this recent pause would turn into a shallow new base.
The automaker has a dual listing on the Hong Kong exchange.
Li stock has a 95 IBD Composite Rating out of a best-possible 99.
Bottom line: Li Auto stock is in buy range, but investors should be wary after such a big run.
NetEase Stock
NetEase is a Chinese mobile gaming giant.
It’s profitable, but growth has been spotty in recent quarters amid a Chinese government crackdown on video games.
NetEase reported May 24 that Q1 earnings rose slightly vs. a year earlier, defying views for a decline. Revenue rose 18%. Year over year comparisons are becoming more difficult: Q4 EPS surged 333%, with revenue growth picking up to 27%.
NetEase stock hit a record high at 134.33 in February 2021 but tumbled to 77.79 last August. Shares rallied to 118.19 on Nov. 22, right as the Nasdaq peaked, then dropped back below its 50-day and 200-day lines.
Shares hit a 22-month low on March 14, but since then have rebounded.
NetEase stock is back above its 50-day line and even the 200-day line, a key resistance level for the past several months. Shares recently hit their best levels since early February.
NTES stock is in a deep consolidation going back to late November, or as part of a massive double-bottom base from February 2021.
NTES stock recently tried to clear key resistance levels at 108. NetEase tried to break out on June 10, but pulled back. Shares have since tumbled back below their 200-day and 50-day line to their lowest levels in nearly two months.
The RS line for NTES stock has backed off after recently hitting a 52-week high.
Bottom line: NTES stock is not a buy.
BYD Stock
BYD is the biggest pure-play Chinese EV maker. It makes electric cars and buses and many hybrids. It’s also a major EV battery maker. Warren Buffett’s Berkshire Hathaway (BRKB) is a longtime investor.
Notably, BYD is profitable, though it was subdued in 2021 as capital spending surged to power the company’s ongoing expansion. BYD reported first-quarter net income jumped 241% in local currency terms vs. a year earlier. That was in line with a recent forecast for 174%-300% growth. Revenue rose 63%.
On July 3, BYD reported June NEV sales of 134,036, up 224% vs. a year earlier and nearly 17% above May’s 114,943.
It sold 133,762 passenger NEV in June, including 69,544 EVs and 64,218 PHEVs. It sold 274 new energy commercial vehicles, such as buses.
Q2 sales surged to 355,021 NEVs, booming 256% vs. Q2 2021 and 24% above Q1’s 286,329.
As a result, BYD roared past Tesla in terms of vehicle sales last quarter — leading by nearly 100,000 — arguably seizing the EV crown.
Tesla still leads in all-electric vehicles, with BYD selling 180,296 passenger EVs in Q2.
As of the end of March, BYD ended production of its traditional gas-powered cars.
BYD largely avoided production hiccups amid China’s Covid lockdowns, helped by its in-house battery and chip operations.
The automaker sold 641,350 NEVs in the first half of 2022, up 315% from a year earlier. But that also means BYD will ramp up the pace in the second half of the year. The automaker has conservatively targeted 1.5 million in unit sales this year, or up to 2 million if supply constraints ease.
BYD’s sixth auto plant began rolling vehicles off production line on June 30.
BYD also has begun mass production of its Seal sedan, according to a local government report, suggesting deliveries will start in July. The Seal is a Model 3 rival, with similar range but $10,000 cheaper. Unlike many Tesla rivals, when BYD launches a new model, it quickly produces in volume.
As of late June, the BYD Seal reportedly had received more than 110,000 pre-orders since they opened on May 20.
Like Nio and Xpeng, BYD began selling EVs in Norway in late 2021, starting with the Tang SUV. On July 5, it announced plans to enter the Netherlands, but didn’t provide specifics on when sales might begin.
The China EV giant does plan to move upscale significantly. It will unveil a high-end brand in the third quarter and roll out its first model in the fourth quarter, a BYD executive said on May 22. Prior reports suggest it could be called Xingji, which means “star.” The brand will target the luxury market for 800,000 ($119,520) to 1.5 million yuan vehicles, the exec said, who added that the first model will be an off-road SUV.
BYD’s 90%-owned Danza unit has just launched a minivan in the affordable luxury space. A Danza SUV will be unveiled soon. Mercedes-Benz owns 10% of Danza.
On June 8, a BYD executive said the company will supply batteries to Tesla, after months of speculation.
Toyota reportedly will make a small EV car for the China market in late 2022, using BYD Blade batteries. It’s possible that BYD will play a big role in Toyota’s new, sweeping EV push in the coming years.
Stocks plunged to a multimonth low on March 14 but have rebounded powerfully. On May 17, BYD jumped above a mini-consolidation within a 48%-deep cup base and then moved above the 200-day line. BYD stock blew past an early entry in late May and has continued to move toward record highs.
BYD stock broke out on June 27. Shares are in range from the 39.81 buy point.
The relative strength line is at record highs.
BYD is listed in Hong Kong and trades over the counter in the U.S. The BYDDF stock chart is prone to lots of little gaps up and down.
Warren Buffett’s Berkshire Hathaway is a longtime investor in BYD. Cathie Wood’s Ark Invest has a small stake in BYD.
Bottom line: BYD stock is a buy.
Tesla Vs. BYD: China Rival Seizing EV Crown
Xpeng Stock
Xpeng makes the G3 small SUV, the P7 sedan and the smaller P5 sedan. Preorders for its premium five-seat G9 SUV will start in August, with deliveries beginning in September.
The EV maker has now opened P5 reservations in Norway, Denmark, Sweden and the Netherlands. It already sells some G3 SUVs and P7 sedans in Norway.
Xpeng reported an in-line first-quarter loss, with revenue up 153%.
Xpeng delivered 15,295 vehicles in June, up 51.1% from May and 133% vs. a year earlier. It was the best monthly sales since December. XPeng delivered 34,422 units in Q2, above its previous range of 31,000 to 34,000 units. That was just below Q1’s 34,561.
Xpeng reportedly is undergoing an executive shakeup that signals a reined-in approach to European expansion, amid lackluster sales and overall limited production. The automaker also appears to be shifting toward higher-end EVs vs. mass-market vehicles.
Shares in March skidded to their worst levels since late 2020, not far from all-time lows. But XPEV stock has nearly doubled since then, racing above the 50-day line and almost back to its 200-day. Shares have pulled back from the 200-day line recently, but rebounded July 5 from their 21-day line.
Bottom line: Xpeng stock is not a buy.
JD.com Stock
JD.com is a Chinese e-commerce giant.
The online retailer reported better-than-expected first-quarter earnings on May 17, with revenue up 18%. Results largely came before the massive Shanghai Covid lockdowns.
JD.com stock peaked at 108.29 in February 2021, and bottomed at a two-year low of 46.83 in May 2022.
Shares rebounded back above its 50-day line in early June, but have hit resistance near their 200-day line.
Even with the lockdowns over, consumer spending could take months to recover, CEO Xin Lijun told Bloomberg on June 17. JD.com is exploring an expansion into food delivery, he said.
JD.com founder Richard Liu recently stepped down as CEO. He remains chairman.
Bottom line: JD.com is not a buy.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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