China is the world's No. 2 economy and home to dozens of companies that trade in the U.S. Right now, Trip.com, Tesla rival BYD, Vipshop, Baidu and Alibaba are China stocks worth watching or potentially buying.
Chinese stocks have rebounded after a tough couple of years. The Covid pandemic, and Beijing's zero-Covid policy, slammed the economy. Meanwhile, regulatory crackdowns vs. technology and data-centric firms such as Alibaba, Tencent and NetEase have been a major headwind. Covid restrictions are over while the tech crackdown seems to have ended. But economic activity has disappointed in recent months.
China's central bank cut several lending rates in June, while the government has extended a purchase tax exemption for many electric vehicles, but investors appear to want more.
U.S. tensions are a concern. In recent months, the White House has barred shipments of key chip technology to China, adding to tariffs and other curbs on Chinese goods. Beijing has retaliated.
But after a long stretch where it was difficult to find five top China stocks to buy or watch, a growing number of Chinese companies are setting up. Li Auto has powered well beyond buy zones, but is still worth watching. Nio and XPeng have soared after long slides.
Top Chinese Stocks To Buy Or Watch
| Company | Ticker | Industry Group | Composite Rating |
|---|---|---|---|
| BYD | BYDDF | Auto Manufacturers | N.A. |
| Trip.com | TCOM | Leisure-Travel booking | 99 |
| Baidu | BIDU | Internet-Content | 92 |
| Alibaba | BABA | Retail-Internet | 82 |
| Vipshop | VIPS | Retail-Internet | 90 |
BYD Stock
BYD is China's largest EV maker, and has recently become the country's biggest automaker period. It's also the largest maker of electric vehicles, including its high-mileage plug-in hybrids. It still lags Tesla in battery electric vehicles, or BEVs, but has narrowed the gap considerably.
On July 13, BYD released preliminary first-half results, with earnings up as much as 225% vs. a year earlier. That implies Q2 profit shot up as much as 171%.
BYD didn't rush into the price war, though discounts and price cuts picked up in Q2.
BYD sold a record 262,161 EVs in July, up 61.3% vs. a year earlier and 3.6% vs. June's 253,046. Of the 261,105 passenger vehicles, BYD sold 134,783 all-electric BEVs and 126,322 plug-in hybrids. Overseas sales surged to a record 18,169 in July.
BYD sold 703,561 vehicles in Q2 and 1,255,637 in the first half. The automaker has a 2023 goal of selling at least 3 million vehicles.
BYD now has EVs ranging from just under $11,000 to $160,000.
BYD has begun deliveries of the Denza N7, a premium crossover and the second vehicle from Denza's line. The Denza N8 SUV was officially launched on Aug. 5, with deliveries coming soon. Several other premium models will roll out be formally launched later this year.
The EV giant is massively expanding its vehicle and battery production capacity. It's building a factory in Thailand, and plans to do so in Brazil. It's also signaled intentions to make EVs in Vietnam, with speculation that Europe could follow.
BYD stock cleared a 31.07 cup-with-handle base buy point in early May. The EV giant is now slightly extended from that buy point.
BYD stock has a 34.98 buy point from a flat base, base-on-base pattern. Shares briefly cleared that buy point, but has fallen back to the 21-day line.
BYD stock is listed in Hong Kong and trades over the counter in the U.S. The OTC shares can have little daily gaps, but also are subject to wild swings in the opening minutes of trading before settling down.
Bottom line: BYDDF stock is not a buy.
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Trip.com Stock
Trip.com is a Chinese online travel firm, with operations in various countries.
It's one of the biggest beneficiaries of China's reopening, with millions of people eager to travel within China and beyond.
On June 7, Trip.com reported much better-than-expected first-quarter earnings, with revenue up 107% vs. a year earlier. Analysts expect full-year EPS to soar 433%, essentially to pre-Covid levels.
Trip.com stock more than doubled from the October low of 19.25 to the Jan. 27 peak of 40.17.
Shares consolidating for past six months. In late July, TCOM stock cleared a handle or resistance buy point at 38.16.
Bottom line: TCOM is a buy.
Tesla Vs. BYD: Which EV Giant Is The Better Buy?
Baidu Stock
Baidu is China's search giant but it's also active in artificial intelligence and self-driving technology, with autonomous ride-hailing operations underway in several Chinese cities.
The tech giant says its Ernie Bot outperforms OpenAI's ChatGPT on several measures.
Earnings growth has accelerated for the past three quarters, from -1% to 32%. Revenue grew 1% in Q1, after three quarters of year-over-year declines.
Baidu stock briefly cleared a handle buy point of 152.44, but is just below that entry now. Investors also could use the July 31 high of 136.98 as a new handle entry.
Bottom line: BIDU stock is not a buy.
Vipshop Stock
Vipshop is a specialty Chinese e-commerce firm.
Earnings growth accelerated to 55% in Q1, with sales up 1%, ending a five-quarter string of year-over-year declines.
VIPS stock broke out from a consolidation in early June, racing higher over a few weeks. Shares have round-tripped a double-digit gain and are finding support near the top of the old base and the 50-day line.
VIPS stock forged a base-on-base formation with an 18.48 buy point, after finding support at the 50-day line and the top of the old base. On July 28, VIPS stock cleared a short-term high, offering an early entry. On July 31, shares officially broke out.
VIPS has fallen slightly below those entries, but is holding support at the 21-day line.
Bottom line: VIPS stock is not a buy.
Alibaba Stock
Alibaba is a China e-commerce giant and a major cloud-computing play.
Q1 EPS rose 24% vs. a year earlier, picking up from two quarters of 5% year-over-year gains. Revenue fell 6% for a third straight quarter.
After more than doubling from late October to late January, shares fell sharply.
But shares have made an impressive move higher in the past several weeks. First, regulators slapped a big fine vs. Alibaba affiliate Ant Group, but that was viewed as marking the end of Beijing's long crackdown. A few days later, China's premier met with key internet companies such as Alibaba, saying he wanted to help them grow.
BABA stock broke above its 50-day and 200-day lines on July 7. The July 28 move above the July 25 high of 98.49 offered an early entry, but shares have fallen just below that level.
Investors may want to look to the July 31 high of 102.50 as a better entry now.
Bottom line: BABA stock is not a buy.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
