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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).
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.
China’s shutdowns, notably in Shanghai, took a massive toll on production, supply chains and spending. China EV sales for Li Auto, Xpeng and Nio (NIO) rebounded somewhat in May as restrictions eased slightly, following sharp declines in April. A full recovery may not occur for a few more weeks.
However, EV giant BYD, benefiting from in-house chips and batteries, reported yet another month of record sales in May.
Several local governments are providing modest 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.
Didi Global (DIDI), soon to deslist from U.S. markets, rocketed on June 6 with China reportedly set to end a cybersecurity probe and let the ride-hailing giant add new users and go back on key app stores. That could boost optimism generally.
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.
IBD Digital: Unlock IBD’s Premium Stock Lists, Tools And Analysis Today
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.
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 in general are still out of favor, though BYD is acting well and many are rebounding off lows.
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 | 68 |
| NetEase | NTES | Computer-Software Gaming | 92 |
| BYD | BYDDF | Auto Manufacturers | n.a. |
| JD.com | JD | Retail-Internet | 51 |
| Xpeng | XPEV | Auto Manufacturers | 17 |
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).
On May 10, Li Auto reported 7 cents per ADR adjusted vs. a modest loss a year earlier. Revenue leapt 167.5% to $1.51 billion, slightly beating.
Li Auto forecast Q2 revenue of $972.3 million-$1.11 billion, up 22%-40% vs. a year earlier but far below consensus. It also forecast Q2 deliveries of 21,000-24,000 Li One SUV hybrids.
On June 1, Li Auto reported it delivered 11,496 Li One SUV hybrids in May, up 176% vs. April and 166% vs. a year earlier. The Li One is actually a hybrid, with a small gasoline engine to extend its range. Li delivered just 4,167 in April, down 62% vs. March’s 11,034 and 25% below a year earlier. Many suppliers were shut down, severely affecting Li’s production.
The May data suggests Li Auto will easily top its recent Q2 delivery forecast.
Li Auto plans a big expansion going forward. It will release a larger, more-advanced L9 hybrid SUV on June 21, with deliveries starting in August. Li Auto expects L9 deliveries to reach 10,000 by 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. On June 6, LI stock gapped above its 200-day line.
The automaker has a dual listing on the Hong Kong exchange.
Li stock has a 68 IBD Composite Rating out of a best-possible 99.
Bottom line: Li Auto stock is not a buy.
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.
Shares appear to working on a handle on a daily chart. On a weekly chart, NTES stock has a handle with a 107.15 buy point.
The RS line for NTES stock is at a 10-month high.
Bottom line: NTES stock is not a buy, but is looking stronger.
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 June 2, China EV and battery giant BYD (BYDDF) reported May sales of 114,943 EVs and plug-in hybrids. Sales surged 250% vs. a year earlier and rose 8% vs. April’s 106,042.
BYD sold 114,183 passenger new energy vehicles in May. That includes 53,349 EVs, a slight decline vs. April, and 60,834 PHEVs.
Hybrid sales have surged thanks to a new, fuel-efficient DM-i system that provides substantial battery range. As of the end of March, BYD ended production of its traditional gas-powered cars.
BYD largely avoided April production hiccups amid China’s Covid lockdowns, helped by its in-house battery and chip operations.
The automaker is conservatively targeting 1.5 million in unit sales, or up to 2 million if supply constraints ease.
BYD launched the Yuan Plus in China on Feb. 19. The compact SUV will launch in Australia this summer as the Atto 3. The Yuan Plus also will enter the Singapore market. Exports are likely to be a big part of BYD’s future, as production continues to ramp up sharply.
BYD began preorders for its new Seal model on May 20, saying it received 22,637 preorders in the first seven hours. Deliveries will start in a few months. 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.
Like Nio and Xpeng, BYD began selling EVs in Norway in late 2021, starting with the Tang SUV.
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.
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. Shares jumped on April 4 back above the 50-day. The EV and battery giant has generally held the 50-day line since then, trading relatively tightly over the past several weeks, before a bullish upside reversal in the week ended May 13.
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 appeared to be working on a handle, but then surged above that 34.60 level on May 26, offering an early entry. It’s continued to move higher, now well extended from that early buy point.
The official buy point is 41.34, ideally BYD stock would form a handle before breaking out. Shares are well extended from the 200-day and 50-day line.
The relative strength line is at a record high.
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 not 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. On Nov. 12, Xpeng unveiled the G9 SUV, saying it’s targeted for international markets. The fast-charging SUV is due to launch in Q3 2022.
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 10,125 vehicles in May, the automaker announced on June 1. That was up 12.5% vs. April and 78% vs. May 2021. The EV maker delivered 9,002 vehicles in April, down 42% vs. March.
Xpeng had previously forecast it would deliver 31,000-34,000 EVs in the second quarter. That would be below the 34,561 EVs that China’s Xpeng delivered in Q1, up 159% vs. a year earlier.
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. Shares are back to their sliding 50-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 on Feb. 17, 2021, and bottomed at 61.65 on July 25. Shares hit a multimonth high in November, but then tumbled until early January.
In March, JD.com stock fell to its worst levels since May 2020. JD stock surged in late March but have fallen back again.
JD.com founder Richard Liu recently stepped down as CEO. He remains chairman.
JD.com stock has just rebounded from its 50-day line.
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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