In this article, we will look at the 10 most promising Chinese stocks to buy now according to analysts. If you want to explore similar stocks, you can also take a look at 5 Most Promising Chinese Stocks According to Analysts.
China’s recovery is kicking in rapidly as the nation emerges from long and strict COVID-19 lockdowns. According to Goldman Sachs Research, China’s GDP is expected to expand by 6.5% in 2023, on an annualized basis. Moreover, economists at Goldman Sachs Research estimate that China’s rapid reopening is also expected to expand global GDP by 1% in 2023.
“Three Direct Channels” That Will Boost Global Economic Growth
According to Goldman Sachs’ economists, there are “three direct channels” through which China’s reopening is expected to drive global economic growth.
Firstly, the reopening of China is expected to result in heightened exports to China’s trade partners. GS Research estimates that that the resumption of activity could raise domestic demand by 5% in China and also drive GDP in the APAC region by 0.4% in 2023.
Moreover, the reopening of the China is expected to drive its travel trade deficit and also expand foreign GDP as the region’s tourism recovery kicks in.
Finally, the ending of the zero-Covid policy in China is expected to ramp up demand and boost prices for commodities, especially oil. GS Research estimates Chinese oil demand to top one million barrels per day which can potentially drive crude oil prices up by roughly $15 per barrel, at least. Higher oil prices as a result of China’s reopening are expected to drive growth in oil exporting regions such as North America and Latin America.
Analyst Bullish on China
On February 13 HSBC’s global chief investment officer, Willem Sels, appeared in an interview on CNBC where he talked about how “the market is underestimating” the impact that China’s reopening on the global economy. Here are some comments from Willem Sels about the reopening of China and its impact on the global economy:
“In terms of the travel that we’re seeing, they’re back at 90% of the normal travel that we saw over Chinese new year, compared to a number of years ago. So I think that reopening is going to go very quick and of course that has an impact on the region… But it also has a positive effect on the rest of the world. So I think the risk of a global recession has been reduced significantly”
Willem Sels said that he is most bullish on China and the Association of Southeast Asian Nations (ASEAN) due to the fact that he is seeing “low valuations, low investor positioning, and earnings which are very pessimistic and which need to go up”. Sels also made a point about why China does not need to raise interest rates because the region does not have an “inflation problem” and that the reopening of China will not lead to “an inflation spike”. This is because the region has a “disinflation problem rather than an inflation problem” at the moment, and the economy’s “reaccelaration is now a consumer-led story, it’s not a construction story” and it’s not an infrastructure story”. Since this is the case, China’s reopening will not result in a demand for metals “that would feed through into inflation in the west”. Willem Sels thinks that China “can support growth” and markets will be surprised by the economy’s strength in the first quarter and “see a sharp acceleration” from the second quarter onwards.
We have come up with a list of the most promising Chinese stocks to buy now according to Wall Street analysts. Some of top Chinese stock picks of Wall Street analysts and elite money managers include Alibaba Group Holding Limited (NYSE:BABA), JD.Com, Inc. (NASDAQ:JD), and NIO Inc. (NYSE:NIO). These stocks, among others, are discussed in detail below.
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Our Methodology
We screened for Chinese stocks that have received Consensus Buy ratings from Wall Street analysts over the past 3 months. We then calculated the average price target for each stock by taking the mean of analysts’ price targets for that stock. After this, we calculated the average upside potential by taking the percentage change the average price target represents from the stock’s share price on February 13. We narrowed down our selection to stocks with the highest average upside potential and ranked our picks in ascending order of this metric.
10 Most Promising Chinese Stocks According to Analysts
10. Pinduoduo Inc. (NASDAQ:PDD)
Number of Hedge Fund Holders: 54
Average Upside Potential as of February 13: 10.50%
Chinese e-commerce giant Pinduoduo Inc. (NASDAQ:PDD) is among the most promising Chinese stocks to buy now according to analysts. Over the past 3 months, the stock has received 14 Buy ratings and 2 Hold ratings from analysts and has a consensus Strong Buy rating. The stock has a maximum price target of $135 and an average price target of $106.19. The stock’s average price target represents a potential upside of 10.50% from current levels.
As of December 9, KGI Securities analyst Andrew Cheng has an Outperform rating and a $110 price target on Pinduoduo Inc. (NASDAQ:PDD).
At the end of Q3 2022, 54 hedge funds were bullish on Pinduoduo Inc. (NASDAQ:PDD) and disclosed positions worth $2.49 billion in the company. As of December 31, Ray Dalio’s Bridgewater Associates is the top investor in the company and has a position worth $297.3 million.
Other Chinese stocks that Wall Street analysts are bullish on include Alibaba Group Holding Limited (NYSE:BABA), JD.Com, Inc. (NASDAQ:JD), and NIO Inc. (NYSE:NIO).
9. XPeng Inc. (NYSE:XPEV)
Number of Hedge Fund Holders: 20
Average Upside Potential as of February 13: 23.89%
XPeng Inc. (NYSE:XPEV) is one of China’s leading EV manufacturers. As of February 13, the company is worth $8.19 billion on the open market. On February 1, the company announced that its deliveries of smart EVs for the month of January totaled 5,218, of which 2,249 were the company’s G9 SUVs.
Over the past 3 months, XPeng Inc. (NYSE:XPEV) has received 7 Buy ratings and 3 Hold ratings from Wall Street analysts. The stock has a maximum price target of $18 and an average price target of $11.72. The stock’s average price target represents an upside of 23.89% from its closing price on February 13. XPeng Inc. (NYSE:XPEV) is ranked among the most promising Chinese stocks to buy now according to analysts.
At the close of the third quarter of 2022, 20 hedge funds were long XPeng Inc. (NYSE:XPEV) and held stakes worth $178.3 million in the company. As of December 31, quant hedge fund Two Sigma Advisors is the top investor in XPeng Inc. (NYSE:XPEV) and has disclosed a position worth $30.7 million in the company.
8. NetEase, Inc. (NASDAQ:NTES)
Number of Hedge Fund Holders: 24
Average Upside Potential as of February 13: 24.44%
NetEase, Inc. (NASDAQ:NTES) is a premier Chinese internet technology company that offers a variety of online services for . The company has four divisions: Online Game Services, Youdao, Cloud Music, and Innovative Businesses & Others. At the end of Q3 2022, 24 hedge funds held positions in NetEase, Inc. (NASDAQ:NTES) worth $769.12 million.
This January, Morgan Stanley analyst Alex Poon reiterated his $107 price target and an Overweight rating on NetEase, Inc. (NASDAQ:NTES). NetEase, Inc. (NASDAQ:NTES) has a consensus Strong Buy rating among analysts. The stock has received 9 Buy ratings from Wall Street analysts over the past 3 months and is one of the most promising Chinese stocks to buy now. The stock has an average price target of $109.33 which represents a potential upside of 24.44% from current levels.
As of December 31, Orbis Investment Management is the most prominent shareholder in NetEase, Inc. (NASDAQ:NTES) and has a position worth $334.36 million in the company.
7. Li Auto Inc. (NASDAQ:LI)
Number of Hedge Fund Holders: 20
Average Upside Potential as of February 13: 26.32%
Li Auto Inc. (NASDAQ:LI) is another leading Chinese EV maker that is among Wall Street analysts’ top picks. Li Auto Inc. (NASDAQ:LI) has received 8 Buy ratings and 1 Hold rating from analysts over the past 3 months and has an average price target of $31.53. The stock’s average price target represents a potential upside of 26.32% from the stock’s closing price on February 13. Li Auto Inc. (NASDAQ:LI) is one of the most promising Chinese stocks to buy now according to analysts.
This February, Citi analyst Jeff Chung raised his price target on Li Auto Inc. (NASDAQ:LI) to $51.50 from $48 and maintained a Buy rating on the shares. Chung is “impressed” by the company’s pricing strategy.
At the end of the third quarter of 2022, Li Auto Inc. (NASDAQ:LI) was a part of 20 investors’ portfolios. The total stakes of these hedge funds were valued at $1.07 billion. As of December 31, Andreas Halvorsen’s Viking Global is the leading investor in the company and has disclosed a position worth $185.4 million.
6. GDS Holdings Limited (NASDAQ:GDS)
Number of Hedge Fund Holders: 17
Average Upside Potential as of February 13: 29.48%
GDS Holdings Limited (NASDAQ:GDS) is a leading Chinese internet services and infrastructure company. The company provides colocation services, managed hosting services, cloud services, and consulting services to cloud service providers, internet companies, financial institutions, and telecoms among others.
As of November 23, HSBC analyst Helen Fang has a $36 price target and a Buy rating on GDS Holdings Limited (NASDAQ:GS). The stock is one of Wall Street analysts’ most promising Chinese stock picks and has a consensus Buy rating. The stock has received 8 Buy ratings and 3 Hold ratings from analysts over the past 3 months and has an average price target of $29.82. The stock’s average price target represents an upside of 29.48% from current levels.
At the close of Q3 2022, 17 hedge funds were long GDS Holdings Limited (NASDAQ:GS) and disclosed positions worth $241.9 million in the company. As of December 31, 12 West Capital Management is the top shareholder in the company and has a stake worth $139 million.
In addition to GDS Holdings Limited (NASDAQ:GDS), Chinese stocks that analysts see promising upside potential for include Alibaba Group Holding Limited (NYSE:BABA), JD.Com, Inc. (NASDAQ:JD), and NIO Inc. (NYSE:NIO).
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Disclosure: None. 10 Most Promising Chinese Stocks According to Analysts is originally published on Insider Monkey.