Buy Stock From China
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buy stock from china
Despite disappointing U.S. stock market performance in 2022, you can at least take some consolation if you didn't hold any Chinese stocks this year. When you look at U.S.-listed stocks with a market value of at least $2 billion, there are only a handful of companies headquartered in China that have positive returns year to date in 2022 as of market close on Nov. 18. But as they say, past performance is not indicative of future return, and now may be a great time to bank on a turnaround in Chinese stocks as lingering pandemic restrictions are finally lifted. If you aren't afraid of the risk in this emerging market, here are seven potential winners in China to consider.
Solar energy player Daqo is technically a semiconductor manufacturer, but it is also a green energy company thanks to its focus on photovoltaic products. Based in Shanghai, DQ has close relationships with top policymakers in China who are eager to wean the country off fossil fuels and help clean up the nation's poor air quality in some of its larger and more polluted cities. With a command-and-control central government, it's hard to imagine that China won't rely heavily on home-grown Daqo in the years ahead. Shares are up 31.7% this year as proof that this durable long-term opportunity in DQ outshines other Chinese stocks that have seen trouble in 2022.
U.S. imports of services from China were an estimated $15.6 billion in 2020, 21.2 percent ($4.2 billion) less than 2019, but 36 percent greater than 2010 levels. It was up roughly 370.9 percent from 2001 (pre-WTO accession). Leading services imports from China to the U.S. were in the transportation, research and development, and professional and management services sectors.
Like most equities, Chinese stocks have been hit by the deterioration in macroeconomic conditions in 2022. The reintroduction of lockdowns once again weighed on the performance of the Chinese stock market as government officials took strict measures to prevent the virus from spreading.
The Shanghai Shenzhen CSI 300 Index is a stock market benchmark made up of the common shares of the 300 largest companies by market capitalization. This index may be considered as a useful gauge of how equities as a whole have been performing in the country. It is owned and managed by the China Securities Index Company.
Many well established brokerage firms have operations in China and can facilitate the process of opening an investment account to trade Chinese securities. Opening a bank account in China is not required. However, investors should be aware that funding a Chinese brokerage account with money that comes from overseas can be costly.
Plus, a handful of Chinese companies listed their common shares on US-based stock exchanges via American Depositary Shares (ADS), making it more accessible for retail investors to get exposure to Chinese equities.
Contracts for difference (CFDs) are high risk financial derivatives that allow traders to take either a long or short position on the price direction of securities such as stocks, indices and commodities without owning the underlying asset.
A CFD is an agreement between a broker and a trader to exchange the resulting price difference once the transaction is settled. CFDs involve using leverage, or trading on margin, which means traders can magnify the size of their position by borrowing assets from the broker.
In addition, the US has been weighing the possibility of restricting certain Chinese companies from listing their shares on American stock exchanges. This would dramatically reduce the liquidity of Chinese equity instruments and may harm the valuation of businesses within the country.
Macroeconomic risks remain as central banks are hawkish to combat inflation. The leading example is the US Federal Reserve (Fed), which hiked its federal funds rate from 0.5% to 3.25% in 2022 and is expected to raise them further.
As we look at the decline in international markets like China, investors willing to take some risks when others are fearful may see the benefits. As I recently wrote in Diamonds In The Rough: 3 Top Emerging Market Stocks, international stocks have been struggling under inflationary and recessionary pressures. Over the last year, Chinese markets have sold off by more than 27%. These selloffs have created labor shortages throughout the nation and affected global shipping and supply chains around the globe. Finding good stocks in emerging markets can require some digging. Seeking Alpha offers tools to create your own stock screeners to deliver investors' the names of fundamentally sound companies in some of the biggest developing nations. I used these screens to identify these stocks. Based on our quant ratings, I have selected three Chinese companies with Buy recommendations to consider diversifying a portfolio.
Politics, government regulations, and transparency are other concerns for investors. China has a reputation for falsifying data reports that call into question the integrity of company financials. In addition, the government-imposed restrictions, censorship, etc., have all posed challenges and concerns for investors. Take, for instance, Alibaba's (BABA) intended IPO of Ant Group was held up by Chinese regulators. Or the gaming limitations and pandemic controls placed on Tencent Holdings Limited (OTCPK:TCEHY) and other institutions pose risks to investors investing in any Chinese company. Now my point is not to discourage investors from considering companies in China. I merely want to outline some potential risks and emphasize that the key is performing due diligence and looking for companies with strong fundamentals.
Following last week's news that China is considering a $220B stimulus to boost its economy, several Chinese stocks performed favorably, including two of our picks, JD.com (NASDAQ:JD) and Baidu (NASDAQ:BIDU). China would allow local governments to sell up to $220B in bonds, the first time bonds would be sold before the start of the year. I see this as an opportunity that could prove favorable. For now, I believe looking into sectors that rallied during the last several weeks in the U.S. post-stimulus, like growth and some cyclical consumer-driven sectors post-COVID - and some tech - at their current valuations could prove beneficial. JD and BIDU are well off of their 52-week highs. The tide could be turning for these stocks as all three have outperformed the S&P 500 over the last 4 weeks. With a focus on core metrics, fundamentals, and solid balance sheets, my three stock picks experience some great returns for portfolios.
China is known for its advanced tech industries and varying products and services. As its economy begins to recover from strict lockdowns, we believe three Chinese stocks stand to benefit from the nation's reopening that may be worth considering for a portfolio. Check out these three stock picks.
Headquartered in Beijing, China, JD.com, Inc. is the must-needed supply chain-based technology and logistics company offering various products and marketplace services. It develops, owns, and manages logistics facilities. The company has a healthy balance sheet with more than $7.3B cash on hand and significant year-over-year cash flow growth. Compared to other big-name Chinese companies like Alibaba and Tencent Holdings, its business outperforms. Following signs of increasing revenue last Thursday, JD stock rallied as much as 3%. Despite a less than ideal D Valuation grade, some of the underlying valuation metrics coupled with stellar momentum grades indicate this stock is a solid buy.
Like many Chinese companies, JD.com felt the effects of extended lockdowns and negative sentiments surrounding companies abroad. While JD's stock price comes at a premium, forward EV/Sales of 0.52x indicate a -50.89% discount compared to its peers. Its B- forward Price/Sales are also solid, with a near 30% difference to the sector.
As we look at the stock's momentum grade and quarterly price performance, JD outperforms peers quarterly, with six- and nine-month price-performance nearly 4x and 2x (respectively) better than the sector median. Although the stock's price is -6.47% YTD and JD.com is likely to continue facing headwinds given geopolitical factors, the company continues to increase its customer base, sales, and thus revenue year-over-year. Based on the most recent earnings report and potential business ramp-up amid China's reopening, JD could see tremendous growth and profitability.
The May kickoff of JD.com's annual shopping festival known as 618 Grand Promotion proved successful. Although industry trends indicate that retail e-commerce sales in China have flattened over the last few years, JD continues to experience high growth, including JD's logistics CAGR of 6% forecasted from 2021 to 2026.
Regarding profitability, some of the conventional metrics for the twelve-month trailing are underwhelming compared to the sector. With this in mind, as mentioned above, the company possesses $7.31 Billion in Cash from Operations. In this environment, 'Cash is King'. Given the chip shortages and price increases that have affected some of their tech categories, the reopening of warehouses and fulfillment facilities, and the success of the 618 Grade Promotion, JD stands to see improving results, which is why the Seeking Alpha quant ratings support this stock as a buy.
Stringent regulations and policies have created hurdles to limit the number of Chinese stocks, particularly those in the tech sector like Baidu. Those limitations have caused their stocks to fall, and now with reopening and other tailwinds, I believe these stocks may be positioned to gain. 041b061a72