Hundreds of Chinese companies are listed on U.S. markets. But which are the best Chinese stocks to buy or watch right now? 360 Digitech (QFIN), NetEase (NTES), Futu Holdings (FUTU), Bilibili (BILI) and UP Fintech Holding (TIGR).
China is the world’s most-populous nation and the second-largest economy with a booming urban middle class and amazing entrepreneurial activity. Often dozens of Chinese stocks are among the top performers at any given time, across an array of sectors.
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 listed in the U.S.
Several China stocks are in solar power
For-profit education Chinese stocks are a notable non-tech sector.
- New Oriental Education (EDU)
- Tal Education (TAL)
- 17 Education & Technology Group (YQ)
- GSX Techedu (GOTU).
Chinese Stock Risks
Investors should be aware of significant risks with investing in Chinese stocks. The authoritarian state and its regulators can impose sweeping restrictions, fines or bans on major companies, often with little notice or transparency.
Alibaba ran afoul of regulators in late 2020, with regulators opening probes into internet platforms and suspending the Ant Group IPO. In April, China fined Alibaba $2.8 billion for anti-competitive actions and ordered it to change various practices.
Ant Group is limiting the scope of some of its businesses to comply with regulators’ demands.
On April 29, financial regulators ordered several big internet companies, including Tencent, to stop providing financial services aside from payments.
Further antitrust probes and fines are likely for other internet giants.
Accounting fraud, while less likely with institutional-quality names such as Alibaba, remains a concern. Luckin Coffee admitted to widespread fraud in 2020. Fraud charges alone can trigger massive share price losses.
For-profit education firms, which have faced accounting questions, have come under pressure as local and national officials call for new regulations for the sector.
Meanwhile, a new U.S. law could force Chinese companies to delist from U.S. markets. That threat isn’t imminent, and could be averted with negotiations between the Treasury Department and Beijing over accounting oversight. Still, it’s something that could loom large for China stocks in the coming years.
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 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), a three-times levered 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 levered 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 the stock market rally remains under pressure.
Best China Stocks To Buy: Key Ingredients
Focus on the best stocks to buy and watch, not just any Chinese companies.
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 those with strong earnings growth, such as Alibaba or Pinduoduo stock. If they’re not profitable, at least look for rapid revenue growth as with Nio stock. 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 were out of favor for much of 2021. Whether it’s a general malaise for growth stocks or EV names such as Nio and Xpeng, or a regulatory crackdown for Alibaba, JD.com and other internets, U.S.-listed Chinese stocks generally did not fare well.
But many China stocks are bouncing back.
Why This IBD Tool Simplifies The Search For Top Stocks
Best Chinese Stocks To Buy Or Watch
|Company||Ticker||Industry Group||Composite Rating|
|360 Digitech||QFIN||Financial Services-Specialty||99|
|Futu Holdings||FUTU||Finance-Investment banks/brokerages||99|
|UP Fintech||TIGR||Finance-Investment banks/brokerages||98|
So let’s analyze these five top China stocks: 360 Digitech stock, Bilibili stock, Futu stock, NetEase stock and UP Fintech stock.
360 Digitech Stock
360 Digitech’s data-driven digital platform helps financial institutions target products to consumers.
That’s paying off. 360 Digitech earnings growth has accelerated for four straight quarters. In its first quarter report released on May 27, 360 Digitech earnings surged 458% vs. a year earlier, crushing views. Sales also beat easily, though growth slowed significantly to 22%.
In a delayed reaction, QFIN stock skyrocketed 20% on June 1. On June 3, shares spiked to a record high and have continued to push higher.
QFIN stock is now out of range from an alternate buy point of 35.25, with the IBD 50 stock extended right now. With the exception of a couple days, 360 Digitech has risen almost straight from the bottom in just a few weeks.
Investors could have bought QFIN stock at a 28.61 double-bottom buy point, or perhaps as it cleared a pseudo-handle on June 1.
Keep a close eye on this hot stock to see if it sets up again.
The relative strength line for QFIN stock is back at record highs. The RS line, the blue line in the charts provided, tracks a stock’s performance vs. the S&P 500 index.
QFIN stock has a best-possible 99 IBD Composite Rating.
Bilibili provides an online entertainment platform targeting younger generations in China. In addition, the platform includes videos, live broadcasting, and mobile games.
The company is not yet profitable, and is projected to keep losing money through at least 2022. But sales growth has been strong, with Q1 revenue up 82%.
Bilibili stock nearly tripled from a late November breakout to the Feb. 11 peak of 157.66. Shares then corrected 46% to 84.40 on May 13, finding support just above the 200-day line.
BILI stock rebounded above its falling 50-day line on May 28. Shares recently found support at that level again. There’s an early entry for Bilibili stock at 122.83.
The RS line has fallen significantly since early February after a big uptrend, but is trying to bounce back.
Futu Holdings is a Chinese online brokerage and wealth management firm.
Futu earnings shot up 531% per share in the first quarter, easily beating views. Revenue growth leapt 348%, accelerating for a sixth straight quarter.
The EPS Rating is an 84. The Composite Rating for FUTU stock is 99.
Since clearing a downward-sloping trend line at the end of 2020, FUTU stock erupted for a gain of more than 480% to its Feb. 10 peak of 204.25. Shares then lost more than half their value by late March 25 before rebounding again. On April 19, FUTU stock exploded for a 16% gain, breaking out of a deep, loose cup-with-handle base. But shares plunged 23% the following session on a proposed stock offering, which priced a couple days later.
FUTU stock reclaimed its 50-day line on May 26.
The official buy point is 204.35, but 178.28 is an early entry. FUTU stock is nearing an extremely aggressive trend line entry as it carves a possible handle right around the midpoint of the consolidation.
On June 1, Futu said it gained 100,000 accounts in Singapore since launching there three months ago.
The RS line for this China stock leader is well off highs but that follows a stretch of massive outperformance.
The mobile gaming giant on May 18 reported a 25% EPS gain on a 30% revenue gain for the first quarter, both topping views. That followed two quarters of declining EPS.
NTES stock has been a leading U.S.-listed China stock since 2000. But it announced in late May that it plans a Hong Kong IPO for its streaming music service.
Its current consolidation is only 26% deep, much better than many Chinese stocks. NTES stock bottomed in late March, just above its 200-day line and right around the top of a prior base, both natural areas of support.
NetEase has a handle but the midpoint is below the midpoint of the base, so it’s technically not valid. But investors could use 120.94 as an early entry. The official buy point is 134.43, according to MarketSmith.
Right now the concern for NetEase stock is holding the 50-day line, but it rebounded from that level on June 10.
The Composite Rating for NTES stock is 62.
The RS line for NTES stock is well off highs.
UP Fintech Stock
UP Fintech is an online brokerage focusing on Chinese investors.
Revenue growth has accelerated for six straight quarters, to 256% in Q1. UP Fintech earnings per share shot up to 16 cents vs. 1 cent a year earlier.
TIGR stock went on a massive run starting at the tail end of 2020, spiking 400% from the 7.70 buy point to the 38.50 peak on Feb. 19. Shares then plunged two-thirds to 12.87. After some ups and downs, TIGR stock has soared from a May 13 short-term low of 14.21. But UP Fintech stock is still building the right side of what would be a very deep base.
The official buy point is 38.60. Ideally, TIGR stock would rally further and form a handle, shaking out weak holders and offering a lower entry.
The RS line for TIGR stock is rebounding but well off highs, but that follows a near-vertical ascent in early 2021.
Like QFIN, UP Fintech is one of the first names in the IBD 50 currently.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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