In this piece, we will take a look at 11 cheap Chinese stocks to buy right now. If you want to skip our overview of some top Chinese companies and the broader Chinese economy, then take a look at 5 Cheap Chinese Stocks to Buy Right Now.
China’s meteoric rise over the past couple of decades has changed the global political and economic dynamics. The country’s massive population and geographical area provide it with the perfect set of ingredients to develop a large economy. As a result, Chinese companies and business hubs such as Hong Kong are among some of the largest in the world.
At the same time, China’s rise as a global power has created friction with the Western world, particularly the United States. The U.S.’s well developed and advanced corporate sector has relied on China’s abundant labor and cheap costs to outsource expensive mass production away from the U.S. to offshore regions. This outsourcing has proven to be a boon for the Chinese economy through the form of capital flows that are called foreign direct investment (FDI). FDI is the inflow of dollars into a country’s economy in the form of private capital, and it generally comes in the form of capital expenditures by foreign companies to set up their manufacturing or associated facilities.
When it comes to FDI, the post coronavirus era has been quite rough in China. Not only has the country’s economy failed to recover, but a drop in FDI suggests that Chinese economic growth might be entering a new era. Foreign companies are wary of investing in China due to worries about excessive government control, especially since a corporate crackdown that saw the country’s government take on one of its richest individuals, the billionaire founder of Alibaba Group Holding Limited (NYSE:BABA), Mr. Jack Ma. According to data compiled by the Financial Times, FDI in China dropped to $10 billion in September, for a 34% annual drop which is the biggest since data started to be collected in 2014. These figures show that foreign companies are eager to move their capital away from China instead of reinvesting in the country which hints at a broader investor pessimism about China’s futures. Additionally, the investment climate of 2023 and the near future is quite different from that of 2019 since interest rates have soared. These encourage a flight of capital away from growth economies to the stability of the U.S. money market. As a result, the high interest rates are another factor that FDI in China is dropping.
Shifting gears to the top players in China’s corporate sectors, some of the most valuable Chinese companies that trade on U.S. exchanges are Alibaba Group Holding Limited (NYSE:BABA), PDD Holdings Inc. (NASDAQ:PDD), NetEase, Inc. (NASDAQ:NTES), and JD.com, Inc. (NASDAQ:JD). This list is perhaps the clearest example of Wall Street’s optimism about China’s population, which is the second largest in the world after India. This is because within this list of the four biggest Chinese companies by market capitalization, three are retailers, and the remaining one, NetEase, is a video game developer. In fact, its ability to connect Chinese merchants with a global customer base as well as users scattered all over the country itself has proven to be a key reason behind Alibaba and Jack Ma’s meteoric rise to fame.
While most of the Chinese retail sector is yet to report its crucial earnings for the third quarter of 2023, giants such as Alibaba and JD are making moves to keep up with the times. As even Elon Musk’s X (formerly Twitter) has announced its own artificial intelligence product, Alibaba also shared its upgrades to the AI model Tongyi Qianwen. According to the company, Tongyi Qianwen 2.0 is capable of computing billions of parameters as well as providing customized models for specific use cases such as finance and creative writing.
Another important Chinese retailer, and a relatively younger firm, is MINISO Group Holding Limited (NYSE:MNSO). MINISO is currently busy expanding its global footprint, and October 2023 has proven to be a busy month for the firm on this front. It started October by opening its first blind box store in the U.K. A blind box store aims to engage customers by offering blind boxes with toys and other products. Then, MINISO opened another store in Indonesia which is decorated along the theme of cartoon characters created by the Japanese theme park company Sanrio. The company ended October on a strong note as it added three new stores in Hong Kong, with these stores also offering products such as blind boxes.
Finally, as for JD.com, Inc. (NASDAQ:JD), here’s what the senior investment strategist at Kraneshare, Anthony Sassine, has to say:
Yeah, no, I don’t think it’s a value trap. Look, the e-commerce opportunity in China is a major opportunity for long term. We’re still only at 27% penetration of total retail and JD is one of the highest quality e-commerce players out there with very superior logistic capabilities. But JD, it happened that this year, they focused they focus usually on brands and electronic and appliances. And that’s not growing because China’s recovery is not coming back.
But if you look at it for the future, I think JD is best positioned to kind of capture the recovery. Because you have very low valuations today and, you know, despite high savings, people are not buying big ticket items. If you look at low ticket items like clothing, apparels, footwear, these are growing double digits 15%, 17% year to date. That’s why you’re seeing Pinduoduo and VIPS doing well. So if you want to capture that recovery, I think, JD is better positioned.
But we always recommend with investors, these companies are going to go through cycles, ups and downs. We’re very optimistic on the long term. We think everything is going to move online despite the short-term noise and the short-term bumps. That’s why we recommend people to access these companies through ETFs like KWEB, you know, where you get the whole basket. And then as these companies go through cycles, you continue to earn the return or grow with that pie, the e-commerce pie over the long term.
So what are some cheap Chinese stocks to buy as valuations remain stressed in a slow economy? We took a look and the top three stocks are Weibo Corporation (NASDAQ:WB), Daqo New Energy Corp. (NYSE:DQ), and Vipshop Holdings Limited (NYSE:VIPS).
Pixabay/Public domain
Our Methodology
To compile our list of the top cheap Chinese stocks to buy, we first made a list of Chinese firms with a market capitalization greater than $200 million and the lowest price to forward earnings ratio. Then, the top 20 Chinese stocks with the greatest number of hedge fund investors in Q2 2023 were selected. These were ranked by their P/E ratio, and the top cheap Chinese stocks are as follows.
11 Cheap Chinese Stocks to Buy Right Now
11. KE Holdings Inc. (NYSE:BEKE)
Forward Price To Earnings Ratio: 15.43
Number of Hedge Fund Investors In Q2 2023: 36
KE Holdings Inc. (NYSE:BEKE) is a Chinese real estate company that operates a platform for real estate transactions. Despite a slowdown in China’s economy that has seen buyers hesitant to commit large sums to pricey real estate purchases, the firm has bucked the trend and beat analyst EPS estimates in all four of its latest quarters.
During Q2 2023, 36 out of the 910 hedge funds part of Insider Monkey’s database had held a stake in KE Holdings Inc. (NYSE:BEKE). Lei Zhang’s Hillhouse Capital Management owns the biggest stake among these which is worth $531 million and comes via 35.8 million shares.
Along with Daqo New Energy Corp. (NYSE:DQ), Weibo Corporation (NASDAQ:WB), and Vipshop Holdings Limited (NYSE:VIPS), KE Holdings Inc. (NYSE:BEKE) is a top cheap Chinese stock to buy.
10. Tencent Music Entertainment Group (NYSE:TME)
Forward Price To Earnings Ratio: 15.15
Number of Hedge Fund Investors In Q2 2023: 23
Tencent Music Entertainment Group (NYSE:TME) is one of the largest media and entertainment companies in the world. The firm’s upcoming third quarter results will be a crucial one to watch for its recurring revenue since the previous report saw it share that its streaming subscribers crossed 100 million in June. Analysts will be wondering whether this will be sustained.
For their second quarter of 2023 investments, 23 out of the 910 hedge funds polled by Insider Monkey had held the firm’s shares. Tencent Music Entertainment Group (NYSE:TME)’s largest investor in our database is Jim Simons’ Renaissance Technologies due to its $74.3 million investment.
9. Trip.com Group Limited (NASDAQ:TCOM)
Forward Price To Earnings Ratio: 15.15
Number of Hedge Fund Investors In Q2 2023: 44
Trip.com Group Limited (NASDAQ:TCOM) is a travel services provider that enables travelers to book and manage their trips. Wall Street appears to be quite optimistic about its prospects since analysts have rated the shares Strong Buy on average and Barclays and TD Cowen kept Overweight and Outperform ratings on the stock in September 2023.
As of June 2023 end, 44 out of the 910 hedge funds tracked by Insider Monkey were Trip.com Group Limited (NASDAQ:TCOM)’s investors. Richard S. Pzena’s Pzena Investment Management owns the biggest stake among these which is worth $230 million.
8. ZTO Express (Cayman) Inc. (NYSE:ZTO)
Forward Price To Earnings Ratio: 13.21
Number of Hedge Fund Investors In Q2 2023: 25
ZTO Express (Cayman) Inc. (NYSE:ZTO) is a sizeable freight and logistics company headquartered in Shanghai, China. The stock faced a bit of a setback in November 2023 as Bank of America downgraded it to Neutral from Buy and cut the share price target to $28 from $34.
25 hedge funds among the 910 covered by Insider Monkey’s research had invested in the company during this year’s second quarter. ZTO Express (Cayman) Inc. (NYSE:ZTO)’s largest hedge fund shareholder is Kerr Neilson’s Platinum Asset Management since it owns 15.6 million shares that are worth $393 million.
7. Baidu, Inc. (NASDAQ:BIDU)
Forward Price To Earnings Ratio: 10.87
Number of Hedge Fund Investors In Q2 2023: 36
Baidu, Inc. (NASDAQ:BIDU) is a Chinese internet company known for its news and other platforms. Owing to its services, which can be optimized, the firm is creating a bit of controversy these days as unconfirmed media reports have suggested that it plans to use Huawei’s AI chips instead of NVIDIA’s.
Insider Monkey scoured through 910 hedge fund portfolios for their June quarter of 2023 investments and found that 36 had bought and owned Baidu, Inc. (NASDAQ:BIDU)’s shares. John W. Rogers’ Ariel Investments is the biggest investor in our database as it owns $377 million worth of shares.
6. iQIYI, Inc. (NASDAQ:IQ)
Forward Price To Earnings Ratio: 9.92
Number of Hedge Fund Investors In Q2 2023: 20
iQIYI, Inc. (NASDAQ:IQ) is a Chinese software company that provides video streaming, live broadcasting, and other services. The firm is currently busy expanding its global portfolio since it signed an agreement with the Thai tourism authority in November 2023 to develop Thai content and support the country’s tourism sector.
20 out of the 910 hedge funds part of Insider Monkey’s Q2 2023 database were the firm’s investors. iQIYI, Inc. (NASDAQ:IQ)’s largest hedge fund shareholder is Jim Simons’ Renaissance Technologies as it owns 11.7 million shares that are worth $62.5 million.
Weibo Corporation (NASDAQ:WB), iQIYI, Inc. (NASDAQ:IQ), Daqo New Energy Corp. (NYSE:DQ), and Vipshop Holdings Limited (NYSE:VIPS) are some great cheap Chinese stocks.
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Disclosure: None. 11 Cheap Chinese Stocks to Buy Right Now is originally published on Insider Monkey.