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, haven taken 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.
The Chinese government OK’d 60 new video game titles earlier this month.
China’s central bank accepted Ant Group’s application to become a financial holding company, Reuters reported on June 17, citing sources. That revived hopes for an IPO of the digital financial giant, which is closely affiliated with Alibaba (BABA) and its founder Jack Ma. China’s last-minute halt to the Ant IPO in late 2020 marked the beginning of China’s tech crackdown.
Alibaba, JD.com and other U.S.-listed Chinese stocks rose strongly on June 17.
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.
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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, 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 correction, with the Nasdaq and S&P 500 in bear markets.
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 are starting to outperform. BYD is near record highs, Li Auto and NetEase are breaking above key levels while many are rebounding off lows.
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Best Chinese Stocks To Buy Or Watch
| Company | Ticker | Industry Group | Composite Rating |
|---|---|---|---|
| Li Auto | LI | Auto Manufacturers | 95 |
| NetEase | NTES | Computer-Software Gaming | 90 |
| BYD | BYDDF | Auto Manufacturers | n.a. |
| JD.com | JD | Retail-Internet | 79 |
| Xpeng | XPEV | Auto Manufacturers | 44 |
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 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 of 21,000-24,000 Li One SUV hybrids.
Li Auto unveiled a larger, more-advanced L9 hybrid SUV on June 21, with deliveries starting in August.
Li Auto recently predicted L9 deliveries would reach 10,000 by September, suggesting a big increase in overall sales.
The L9 got over 30,000 preorders in the first 72 hours, the automaker said Friday.
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. LI stock recently gapped above its 200-day line and then kept running.
On the heels of the L9 reveal and new EV subsidy signals, Li Auto stock broke out past a 37.55 buy point from a deep, six-month consolidation, hitting their best levels since November 2020. But just from the 37.55 buy point, Li is out of range. From the 50-day line, shares are highly extended.
Ideally, Li Auto would form a short consolidation or new base.
The automaker has a dual listing on the Hong Kong exchange.
Li stock has a 95 IBD Composite Rating out of a best-possible 99.
Bottom line: Li Auto stock is not a buy, but bears watching.
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.
NTES stock recently tried to clear key resistance levels at 108. NetEase tried to break out on June 10, but pulled back. Shares have since tumbled back below their 200-day and 50-day lines.
The RS line for NTES stock has backed off after recently hitting a 52-week high.
Bottom line: NTES stock is not a buy.
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 is beginning mass production of its Seal sedan this month, suggesting deliveries will start in the next month. 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.
On June 8, a BYD executive said the company will supply batteries to Tesla, after months of speculation.
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 blew past an early entry in late May and has continued to move toward record highs.
BYD stock now has a handle with a 39.81 buy point. Ideally, the handle would build out over a few weeks or longer. Shares are well extended from the 200-day and 50-day line.
BYD briefly cleared that buy point on June 24, closing just below that level.
The relative strength line has been hitting record highs.
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, but it’s closing in on a breakout.
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 said June 21 that it had delivered a cumulative 200,000 EVs. That means that it’s delivered at least 8,359 vehicles in June so far.
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 above the 50-day line and almost back to their 200-day.
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 in February 2021, and bottomed at a two-year low of 46.83 in May 2022.
Shares rebounded back above its 50-day line but have stalled after nearing the 200-day line.
Even with the lockdowns over, consumer spending could take months to recover, CEO Xin Lijun told Bloomberg on June 17. JD.com is exploring an expansion into food delivery, he said.
But JD.com shares jumped on June 17, along with many other Chinese stocks, but they are pulling back this week.
JD.com founder Richard Liu recently stepped down as CEO. He remains chairman.
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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