China-based stocks were again strong performers Wednesday amid investor hopes that Chinese health officials will continue to ease their zero-tolerance approach to Covid-19 that sparked protests across major cities in China.
Chinese stocks Alibaba, JD.com, Pinduoduo, Trip.com, along with electric-vehicle stocks BYD, Li Auto, Nio and XPeng, all traded sharply higher Wednesday, some of them extending recent gains.
Chinese Stock ETFs Surge
The Invesco Golden Dragon China ETF looked to close out the month of November with strong gains, showing a weekly advance of more than 18%. The ETF is up around 42% this month, on pace for its best monthly performance on record (based on available data back to December 2004), per Dow Jones Market Data. And the iShares MSCI China ETF shows a weekly gain of 11%, on pace for a monthly surge of more than 32%.
Despite the recent strength, the Hong Kong Hang Seng Index remains down around 20% year to date, but up 25.1% from the year's Oct. 28 low. Meanwhile, the Shanghai composite is still down 13.4% year to date, up 8.9% from its Oct. 31 low.
Chinese Stocks To Watch: Alibaba, JD
Chinese e-commerce giants Alibaba and JD.com continued their string of recent gains with more strong performances Wednesday.
Alibaba shares surged more than 11% in afternoon trade Wednesday. The stock found support at its 50-day moving average this week, but remains below its long-term 200-day line. BABA stock is forming the right side of a bottoming base, but with the stock more than 35% off its 52-week high, it has plenty of overhead supply to work through first.
Meanwhile, JD.com advanced nearly 9% Wednesday, on pace to recapture its 200-day line. Similar to Alibaba, there is no correct buy point yet. But a few more weeks of sustained upside could create a V-shape cup base.
Both Alibaba and JD.com have relative strength lines that are far below their 52-week highs due to their pattern of sharp underperformance heading into the final month of 2022.
Chinese Stocks To Buy And Watch: Pinduoduo, Trip.com
Pinduoduo rallied more than 6% Wednesday, looking to extend a win streak to three sessions. Barclays and Nomura both raised their price targets on the stock.
It is one of the better-shaped charts among Chinese stocks. On Monday, Pinduoduo broke out past a 72.84 cup-with-handle buy point after the company posted strong earnings. Shares are already extended.
In the latest quarter, Pinduoduo earned $1.21 a share on sales of $4.9 billion — year-over-year increases of 572% and 50%, respectively.
Per the IBD Stock Checkup, PDD stock boasts a perfect 99 IBD Composite Rating, a rare feat among beaten-down Chinese stocks.
Trip.com advanced more than 8%, hitting its highest level since October 2021. Investors could view the stock's recent technical action as a choppy cup with handle with a 31.25 buy point. But the stock's volatility, and the lack of a clear-cut buy point, are worrisome.
Chinese EV Stocks Rally
Chinese EV stocks also raced higher Wednesday. BYD stock surged 9.6%, Li Auto soared 23%, Nio jumped 22% and XPeng catapulted 49% in afternoon trade. All four are set to retake their 50-day lines, which could signify a bullish character change in their stock-price behavior.
China EV sales are seen rising in a seasonally strong November, with Nio poised for a sharp rebound as supply headwinds ease and new models ramp up. Early Wednesday, Xpeng Motors offered a better-than-feared Q4 delivery outlook.
