2023 was a year of seismic shifts for the Chinese economy, particularly for its stock market. We witnessed unprecedented underperformance compared to its emerging market peers. The real estate crisis, led by behemoths such as Evergrande and Country Garden, cast a long shadow over the entire economic spectrum, with repercussions likely to reverberate for years to come.
This, coupled with a global economic slowdown and domestic consumer challenges, has catalysed an extensive repricing of Chinese equities, creating an opportune moment for the discerning investor.
However, beneath this tempestuous surface, certain Chinese stocks are maintaining their buoyancy, even defying this reevaluation trend. Below, we delve into three Chinese stocks offering what may be their best value propositions for those looking to make an entrance in 2024. Our focus rests on the fundamental appeal of these stocks, their resilience in the face of adversity, and the unique catalysts that could potentially unlock their latent value.
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3 Chinese stocks to watch in 2024
1. NetEase (NTES.US)
Performance: 13.28% YTD
NetEase Inc, often described as a hybrid of Electronic Arts and Microsoft Azure, has seen a standout performance in the current market. With services that encompass online gaming, cloud computing, and music streaming, NetEase has carved out a multi-faceted presence within the Chinese digital economy.
Performance: -7.77% YTD
VipShop Holdings is China's retail answer to cost-effective, branded goods, securing exclusive deals directly with brands to bring consumers discounted products. Despite facing a more volatile trajectory this last year, with a discernible 9% growth, VipShop maintained its upward momentum through strategic initiatives like its stock repurchase program, underscoring its long-term confidence.
Performance: 7.79%
JD.com Inc Adr, a comprehensive e-commerce platform, faces an undervaluation reflected in its -56% performance last year, presenting an attractive opportunity for investors. With a robust logistics network, JD positions itself as a key player in the competitive landscape, making strategic investments in areas such as robotics, IoT, and AI to fortify its market presence.
Other Chinese stocks that are worth trading
- Alibaba (BABA): As one of the world's largest e-commerce giants, Alibaba's businesses encompass China commerce, international commerce, cloud services, digital media, and entertainment. The company provides consumer-to-consumer (C2C), business-to-consumer (B2C), and business-to-business (B2B) sales. Known for its innovative business model, Alibaba has consistently proven its ability to adapt and thrive in a rapidly changing digital landscape, making it a compelling watch for investors and traders in 2024.
- Tencent (HKG: 0700): Tencent is a leading provider of Internet value-added services in China. Its diverse services include social networks, music, web portals, e-commerce, mobile games, internet services, payment systems, smartphones, and multiplayer online games. Tencent's expansive portfolio and its dominant position in China's digital space make it an attractive prospect for 2024.
- Baidu (BIDU): Baidu is China's leading search engine and also offers various services, including a mapping service called Baidu Maps. Baidu's investments in AI and autonomous driving technologies could potentially drive significant growth, making it worth watching for investors and traders in 2024.
- Sinopec Corp (China Petroleum) (HK386): Sinopec Corp is one of the largest oil and petrochemical enterprises in the world. Given the global demand for energy and the company's efforts in diversifying its energy mix, Sinopec remains a significant player to watch in 2024.
- NetEase (NTES.US): NetEase is a leading internet technology company in China. It is known for its online gaming services and has made significant strides in online education and music streaming services. With its continuous innovation and expansion into new digital territories, NetEase presents intriguing possibilities for investors and traders in 2024.
Risk of trading Chinese stocks
Despite the country's robust economy this year, one must consider political risk when investing in Chinese stocks.
It’s important to keep these risks and regulatory differences in mind when trading, as they could potentially affect the market. For instance, the zero-COVID policy disrupted economic activity, impeding growth and potentially harming investors.
Moreover, China was involved in a trade war with the US that led to the decoupling trend, splitting global power into two sides: China and the US. This has resulted in boycotts of products and services from Chinese companies, such as Huawei. These political risks may pose a threat to investors, and it is essential to consider them before trading Chinese stocks.
Conclusion
Investing in Chinese stocks may be a great opportunity for those looking to diversify their portfolio and tap into one of the world's largest and fastest-growing markets. However, as with any investment, it is crucial to do your research, assess the risks, and understand the unique characteristics of the Chinese market.
Keep an eye on regulatory changes, geopolitical tensions, and other macroeconomic factors that can impact your investments. With the right knowledge and strategy, investing in stocks may be a rewarding experience.
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