5 Best Chinese Stocks To Buy And Watch

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 began opening up physical stores in stages starting May 16, after reporting no community spread outside of quarantine zones for several days. U.S.-listed Chinese stocks soared on May 17. That’s after surging May 13 on signals that restrictions could ease in a few days, and the broader stock market rebound.

China’s ongoing Covid shutdowns, notably in Shanghai, have taken a massive toll on production, supply chains and spending. Shanghai cases are falling, and manufacturing activity has resumed under strict controls.

Shanghai is expected to ease further on June 1.

China EV sales for Li Auto, Xpeng and Nio (NIO) showed sharp declines in April vs. March due to shutdown-related impacts. That wasn’t a surprise. However, EV giant BYD managed to increase April sales slightly vs. March, surging vs. a year earlier.

China could extend EV subsidies due to expire on Dec. 31, Reuters reported on May 18. No decision has been made about extending subsidies, or at what levels. Some local governments are providing modest subsidies for EV or hybrid sales, including Shenzhen.

Regulatory Hopes

China’s Politburo released statements on April 29 suggesting that a broad crackdown on internet platforms will finally be easing.

However, Beijing has given signals over the past year that a tech crackdown was ending, only to renew strict measures and penalties.

U.S. and Chinese regulators appear to be trying to find a resolution. 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.

  • Futu Holdings (FUTU)
  • Up Fintech Holding (TIGR)
  • 360 DigiTech (QFIN)
  • Noah Holdings (NOAH)

Several China stocks are in solar power.

  • Daqo New Energy (DQ)
  • JinkoSolar (JKS)

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.

Don’t forget stocks in other fields, such as riding-hailing outfit Didi Global (DIDI), beauty products maker Yatsen (YSG) or data-center operator GDS Holdings (GDS).


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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 market correction, but another rally attempt is underway.


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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, 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 in general are still out of favor, though a few are starting to bounce back.


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Best Chinese Stocks To Buy Or Watch

Company Ticker Industry Group Composite Rating
Li Auto LI Auto Manufacturers 61
NetEase NTES Computer-Software Gaming 90
BYD BYDDF Auto Manufacturers n.a.
JD.com JD Retail-Internet 47
Xpeng XPEV Auto Manufacturers 11

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).

The company is flirting with being profitable consistently, at least on an adjusted basis.

On May 10, Li Auto reported 7 cents per ADR adjusted vs. a modest loss a year earlier. Revenue leapt 167.5% to $1.51 billion, slightly beating.

But it sees second-quarter deliveries of 21,000-24,000 from its one current model, the Li One SUV. The Li One is actually a hybrid, with a small gasoline engine to extend its range.

That’s would be up 19.5%-36.6% vs. a year earlier, but down from 31,176 in Q1.

On May 1, Li Auto reported it delivered 4,167 Li One hybrid SUVs, down 62% vs. March’s 11,034 and 25% below a year earlier. Many suppliers were shut down, severely affecting Li’s production.

The new Q2 forecast implies May-June deliveries will improve, but still lag Q1’s pace.

Li Auto also forecast Q2 revenue of $972.3 million-$1.11 billion, up 22%-40% vs. a year earlier but far below consensus.

Later this year, Li Auto will introduce a larger hybrid SUV, the L9.

Shares sold off hard in March to their lowest levels since last May. Li stock bounced following Q1 earnings on May 10. Shares retreat from resistance near the 50-day line but are once again testing that key level.

The automaker has a dual listing on the Hong Kong exchange.

Li stock has a 53 IBD Composite Rating out of a best-possible 99.

Bottom line: Li Auto stock is not a buy.

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, like many other Chinese internets, has struggled over the past year. NTES stock peaked 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 are at a 3-month high.

The RS line for NTES stock is at a 10-month high.

Bottom line: NTES stock is not a buy, but is definitely looking stronger.

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 capital spending surged in 2021 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 May 3, the automaker reported it sold 106,042 new energy vehicles (NEV), up 1% from March’s 104,878 and 313% vs. a year earlier. Passenger vehicles totaled 105,475. Of those, BYD sold 57,403 all-EVs, up 256% vs. a year earlier. Plug-in hybrid sales skyrocketed 439% to 48,072 in April.

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 has ended production of its traditional gas-powered cars.

The automaker is conservatively targeting 1.5 million in unit sales, or up to 2 million if supply constraints ease.

Giant BYD largely avoided production hiccups amid China’s Covid lockdowns, helped by its in-house battery and chip operations. However, BYD reportedly suspended production at its Changsha plant in the central Hunan province over environmental concerns.

BYD launched the Yuan Plus in China on Feb. 19. The compact SUV will launch in Australia this summer as the Atto 3. The Yuan Plus also will enter the Singapore market. Exports are likely to be a big part of BYD’s future, as production continues to ramp up sharply.

BYD began preorders for its new Seal model on May 20, saying it received 22,637 preorders in the first seven hours. Deliveries will start in a few months. 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.

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.

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. Mercedes-Benz owns 10% of Danza.

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 appeared to be working on a handle, but then surged above that level on May 26. Investors could use that as an early entry.

The relative strength line recently hit a 52-week high on a weekly chart.

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 has been increasing Ark Invest’s small stake in it in recent weeks.

Bottom line: BYD stock is an aggressive entry.


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. Xpeng already sells some G3 SUVs and P7 sedans in Norway.

Xpeng reported an in-line first-quarter loss before Monday’s open, with revenue up 153%.

The EV maker’s Q2 revenue forecast fell short amid ongoing chip and other supply-chain issues. Xpeng expects to deliver 31,000-34,000 EVs in the current second quarter. That would be below the 34,561 EVs that China’s Xpeng delivered in Q1, up 159% vs. a year earlier.

On May 1, Xpeng reported April deliveries of 9,002 vehicles, down 42% vs. 15,414 in March, as Covid shutdowns affected suppliers, hampering deliveries.

That implies May-June combined deliveries of 22,000-25,000, moving closer to pre-lockdown levels.

Shares in March skidded to their worst levels since late 2020, not far from all-time lows. Xpeng stock is moving back toward those lows again.

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 on Feb. 17, 2021, and bottomed at 61.65 on July 25. Shares hit a multimonth high in November, but then tumbled until early January.

In March, JD.com stock fell to its worst levels since May 2020. JD stock surged in late March but have fallen back again.

JD.com founder Richard Liu on April 7 stepped down as CEO. He remains chairman.

On May 4, JD.com said it would pay out a special dividend of $1.26 per ADR after signaling a payout in late April.

JD.com stock jumped on May 17, moving toward its 50-day line. Shares fell back the next session.

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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