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 Nio (NIO), Daqo New Energy (DQ), Li Auto (LI), Pinduoduo (PDD) and BYD Co. (BYDDF).
XChina 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.
China reported several days of record cases, topping 40,000 on Nov. 27. Several Chinese cities are on lockdown or virtual lockdowns including Beijing.
After two years of zero-Covid policies, the Chinese government had been inching toward slightly easier policies. The Chinese people are increasingly frustrated. Protests vs. lockdowns have spread widely across China.
But Chinese stocks have surged in recent days on signs that the government will ease harsh Covid controls.
The Hang Seng surged 5.2% on Nov. 29 amid hopes that Xi will pivot on harsh Covid controls, with Covid infections falling slightly from record highs. The Hang Seng popped 2.2% on Nov. 30, even after disappointing economic data. Overnight, China lifted the lockdown on Zhengzhou, home to a massive Foxconn iPhone assembly plant.
Many U.S.-listed Chinese stocks rebounded as well.
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:
- Alibaba (BABA)
- JD.com (JD)
- Pinduoduo (PDD)
- Tencent (TCEHY)
- Vipshop (VIPS)
- Baidu (BIDU)
- Tencent Music Entertainment (TME)
- NetEase (NTES)
- Trip.com (TCOM)
- Dada Nexus (DADA)
- Bilibili (BILI)
- Joy (YY)
- KE Holdings (BEKE)
In electric vehicles, several Chinese companies are 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)
- 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. Right now the market is in a confirmed uptrend.
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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. If they're not profitable, at least look for rapid revenue growth. 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.
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 | 32 |
| Daqo New Energy | DQ | Energy-Solar | 92 |
| BYD | BYDDF | Auto Manufacturers | n.a. |
| Nio | NIO | Auto Manufacturers | 9 |
| Pinduoduo | PDD | Retail-Internet | 99 |
So let's analyze these five top China stocks: Li Auto stock, Daqo stock, BYD stock, PDD stock and NIO 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 Dec. 1, Li Auto reported record November deliveries of 15,034 vehicles. That was up 11.5% vs. October's 10,052 and nearly 50% vs. a year earlier.
Li has now ended Li One deliveries, with the newer L9 and L8 SUV hybrids taking the lead.
The L8, a scaled-down L9, began deliveries on Nov. 10.
Li Auto reported on Nov. 26 that parts shortages will delay deliveries of some L9 and L8 versions. It's unclear if that had any impact on late November deliveries.
Li Auto has begun presales of another hybrid SUV, the L7, which will be out by spring 2023. A smaller L6 will be Li Auto's most affordable vehicle. It's due later in 2023. The L6 will expand Li's potential market but also face substantial new competition.
Shares surged to a 52-week high of 41.49 on June 24. LI stock has plunged since then, hitting a two-year low on Oct. 24. Shares bounced in early November, fueled by the Covid policy buzz, as well as the L8 delivery launch.
Li Auto has soared back above its 50-day line, but has work to do to reclaim its 200-day.
Along with concerns about Li's model transition, concerns are growing about China EV market demand generally. Also, Shanghai, a key Li Auto market, will end free license plates for plug-in hybrids on Jan. 1.
The automaker has a dual listing on the Hong Kong exchange.
Li Auto stock has a 32 IBD Composite Rating out of a best-possible 99.
Bottom line: Li Auto stock is not a buy.
Daqo New Energy Stock
Daqo New Energy is one of the leading and lowest-cost manufacturers of high-purity polysilicon for the global solar photovoltaic (PV) industry.
Earnings per share have surged in the past few years, from 64 cents in 2019 to $1.96 in 2020, $9.89 in 2021 and an estimated $27.44 in 2022. But they're expected to fall to $21.64 next year.
U.S. tariffs on Chinese solar products, and possibility of further decoupling between Washington and Beijing, add to potential concerns for investors, along with all the usual risks of buying Chinese equities.
The Energy-Solar group is ranked No. 6 out of 197 currently, but there are definitely leaders and laggards. DQ stock has been somewhat of a laggard.
Daqo stock is trying to build the right side of a consolidation. That four-month consolidation is part of a much-larger base going back to early 2021. Shares has rebounded back above its 50-day and 200-day lines.
A move above the short-term 58.44 high could offer an early entry.
Bottom line: DQ stock is not a buy.
BYD Stock
BYD is the biggest Chinese EV maker. It makes EVs, plug-in hybrids as well as electric buses and heavy equipment. It's also a major EV battery maker.
Notably, BYD is profitable, with growth soaring in 2022 after a subdued 2021 as capital spending surged to power the company's ongoing expansion.
BYD sold 230,427 all-electric and plug-in hybrid vehicles in November, up 153% vs. a year earlier and 5.8% vs. October. That includes 229,942 personal vehicles and 485 commercial units. Of those personal vehicles, some 113,915 were fully electric, or battery electric vehicles (BEVs), up 147% vs. November 2021. Plug-in hybrids shot up 164% to 116,027.
In the first 11 months of 2022, BYD's sales of all-electric and plug-in hybrid vehicles vaulted 132% to top 1.62 million units.
Yet another new BYD plant, this one in Jinan, eastern China's Shandong province, just started mass production.
BYD's 90%-owned Denza unit reported sales for the first time, with 350 Denza D9 minivans sold in October and 3,481 in November. The D9, which comes in BEV and PHEV formats, starts around $50,000. It's unclear if those figures are included in BYD's sales figures. Mercedes-Benz owns 10%.
Exports reached 12,318 in November, up from 9,529 in October and 4,026 in July as BYD begins a massive international expansion.
BYD has entered Australia, New Zealand, Singapore and India in the past several weeks, with deliveries starting in Europe. It'll start Thailand deliveries this month, with Japan, Mexico and many other countries in early 2023.
BYD will build an auto plant in Thailand, with production set to begin in 2024. It's also going to build factories in Brazil, including one for personal vehicles.
The automaker announced in late November that it will raise prices modestly on its BYD and Denza vehicles modestly on Jan. 1, even with subsidies expiring. Many other EV makers are likely to cut prices in 2023, if only to offset the lost subsidies. People who order and pay a deposit for BYD vehicles by Dec. 31 will not face the higher price.
The China EV giant will unveil a high-end brand in Q1. Called Yangwang, which means "looking up," it'll target the luxury market for 800,000 yuan ($110,300) or more, starting with an off-road SUV.
BYD also will launch a highly personalized upscale brand in 2023, with the automaker giving few details. BYD also will launch a personalized brand next year, with few details given. But the brand may target pickup trucks, according to local media, with fully electric and hybrid options.
BYD has begun supplying Blade batteries to Tesla Berlin. The Tesla deal is a major validation for BYD as a battery supplier to third-party automakers.
Toyota (TM) will use BYD batteries and motors in a small EV for the Chinese market, the bZ3. BYD may be actively involved in Toyota's wider EV push in the coming years.
BYD stock has struggled ever since rumors arose in July that Warren Buffett's Berkshire Hathaway (BRKB) was selling some or all of its stake.
Berkshire has sold small slices of its H-shares in BYD in five moves, starting in late August. The latest occurred on Nov. 17, disclosed on Nov. 22.
Berkshire still owns around 7% of BYD, based on all share classes.
BYD stock sold off since midyear, crashing to hit a 17-month low on Nov. 25. Shares have bounced back above their falling 21-day and 50-day lines.
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.
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
Pinduoduo Stock
Pinduoduo is the No. 3 e-commerce player in China, after Alibaba and JD.com.
Pinduoduo on Nov. 28 reported Q3 earnings shot up 256% vs. a year earlier, easily beating views and picking up from Q2's 157%.. Revenue leapt 65% to $4.99 billion, with growth accelerating for a third straight quarter.
Alibaba and JD.com are having a tougher time in a struggling economy. But Pinduoduo's bargain-focused operations have gained in popularity.
PDD stock skyrocketed Aug. 29 on earnings, briefly breaking out. Shares traded in or near the buy zone for weeks before falling back sharply.
Shares leapt above the 50-day on Nov. 4, as they started to build the right side of a 47%-deep consolidation.
PDD stock soared on Nov. 28 following earnings, blasting above a 72.74 handle buy point. Shares have kept climbing and are now extended from that entry.
Bottom line: PDD stock is not a buy.
Nio Stock
While not as large as the diversified, profitable BYD, Nio is the most established of the Chinese EV startups. Nio now has six electric vehicles, the ES8, the ES6, the crossover EC6, the luxury ET7 sedan and now the ES7 SUV and ET5 sedan.
Nio sales hit a record 14,178 EVs in November, up 41% vs. October and 30% vs. a year earlier. The startup has largely shaken off Covid-related production disruptions.
Nio sees further gains in December.
Down the road, Nio has plans to introduce a cheaper sub-brand, and possibly an even-cheaper third brand.
Nio is embarking on a big capacity expansion, and has major international ambitions.
Nio adopted a leasing-only model in Europe initially with ET7 deliveries in Germany, the Netherlands, Sweden and Denmark. It'll offer outright sales starting Nov. 21.
Shares peaked at 66.99 in January 2021, but has struggled since.
Nio stock surged to touch its 200-day line in September. Shares later plunged to two-year lows.
Shares surged on Q3 results and guidance. Nio stock has spiked back above its 50-day line.
Bottom line: Nio stock is not a buy.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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