7 Best Chinese Stocks to Buy

Highlights Nov.21,2022 19:50

Despite disappointing U.S. 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.

Daqo New Energy Corp.

Solar energy player Daqo is technically a 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.

Futu Holdings Ltd.

Futu is headquartered in Hong Kong as part of China's "one country, two systems" approach that allows its socialist market economy on the mainland to exist with capitalism in Hong Kong and the rest of the world. FUTU is a good example of this dichotomy, as its brokerage and wealth management business would fit right in at any major financial center. This allows access to mutual funds, bonds, market data, stock investing and a host of other services. Investors are particularly impressed with its recently minted, -powered investment platform, moomoo, which is connecting with younger investors around the globe. FUTU stock is up 16.9% on the year and looks like it will close out the year with a bang.

KE Holdings Inc.

KE Holdings is in some ways the Chinese equivalent to Zillow Group Inc. focusing on housing transactions and services. KE facilitates home sales, rentals, renovation and furnishing services. There were concerns over the last year or so that China's booming real estate market had gone bust, but recent measures seem to be turning things around. That includes boosting funding to both developers and homebuyers and government measures that will help reduce the size of down payments and cut mortgage rates. Housing is never a sure thing, but the fact that BEKE has doubled since its recent lows a few month ago hints that it may continue to ride strong as we enter the New Year.

Pinduoduo Inc.

Pinduoduo is an platform that has a native mobile interface and effectively functions as an Amazon.com Inc. -like offering in China. PDD's products range from apparel and shoes to packaged foods, appliances, furniture and sporting goods. The company seems to be carving away market share from e-commerce rival JD.com Inc. but, it's also embracing a global ambition to look beyond China in the long term. That has fueled revenue growth of more than 30% this year and stock gains of 20.3% on the year through Nov. 18, while JD stock has slumped 18% in the same period.

TAL Education Group

TAL offers educational and tutoring services in China and saw a huge boom in its business thanks to remote learning during the pandemic. But the Chinese government cracked down on for-profit tutoring services for school-age students, and TAL saw shares crash from the $90 range to less than $10. While we've seen revenue numbers roll back from that peak, some inroads with students ranging from kindergarten to high school have still remained intact, and profit performance has impressed Wall Street lately. Shares are up 41.2% on the year and are priced at less than $6 a share.

Trip.com Group Ltd. (TCOM)

Trip.com operates as a travel service provider in China and internationally, operating much like familiar Western portals that sell airline tickets and hotel accommodations. Trip.com was founded in 1999 amid the first dot-com travel boom and has grown to a dominant $18 billion player in the space. While China's lockdown lingered longer than the rest of the world's, it is finally showing signs of opening up once more – meaning TCOM stock is seeing the same kind of post-COVID tail wind that we saw for U.S. travel and leisure stocks more than a year ago. The result is that Trip.com is projecting more than 50% revenue growth next year and is the top-performing Chinese this year with returns of more than 15.2% since Jan. 1.

Yum China Holdings Inc.

American investors and consumers may be familiar already with Yum! Brands Inc. – the company that operates the brands KFC, Pizza Hut, Taco Bell and others. YUMC is a similar but separate company that operates these franchises in China. As mentioned in some of the previous entries on this list, the belated opening up of China has created a big opportunity in stocks like this one, where consumers will finally be able to get back to their regular spending habits. The stock is in positive territory on the year after a recent rally of about 20% in the last month, showing that investors are increasingly optimistic about this turnaround Chinese stock.

7 best Chinese stocks to buy: