China is the world's most populous country with the second-largest economy, a growing urban middle class and booming companies. What's more, in many industries, dozens of Chinese stocks are often among the best at any given time.
China's zero-Covid policy means that no matter what, companies must operate and grow. A strong quarantine for employees means no major restrictions or closures. After COVID-19 cases began to grow again in several places, lockdowns or other strict rules were reinstated. This means that after the initial phase of the pandemic in 2022, the Chinese stock market index is growing rapidly.
Hundreds of Chinese companies are active in the US and EU markets. But which are the best Chinese stocks to buy or keep an eye on? How to invest in stocks as a novice?
As the world's largest online market, it's no surprise that e-commerce, news, and mobile gaming stocks from China are growing rapidly. Asia stock market is now mostly dominated by the Chinese giants. Various Chinese companies are serious competitors to Tesla (TSLA) in the world's largest automotive market when it comes to electric cars. Below, we'll highlight a few companies worth investing in. Most are noted on NASDAQ, but a couple are just found in the Shanghai index.
Li Auto (LI)
Li Auto is one of a handful of Chinese companies that sell electric cars in the U.S. It's a booming industry, and more and more people are looking to buy an electric car as their next purchase. No wonder that the stock market in China focuses on electric cars.
Li Auto shares fell in pre-market trading in the U.S. after the Chinese electric carmaker lowered their forecasts. At the same time, shares of rival electric car companies Nio and Xpeng jumped after Beijing announced that tax breaks for electric car purchases would be extended, which affected the entire Shanghai index.
Ultimately, the slight drop in stock of LI is still tempting potential investors in the stock market. China and its government can shape the demand and supplies for the shares all over the world!
Baidu (BIDU)
Baidu is the largest search engine in China. It also wants to dominate the developing field of autonomous cars. Its earnings fell slightly in 2021 and are expected to fall again this year, but then rise in 2023, as the analysts of the Chinese stock market predict.
Baidu's second-quarter results fell about 1%, but were better than expected anyway. Baidu stated on August 8 that Wuhan and Chongqing provinces had given them permission to charge for driverless rides in some areas, which could impact the development of the entire self-driving car industry.
Baidu and Geely, which owns Volvo, are working together on a highly autonomous SUV called Robo-01, which is likely to be released in 2023. Should you invest in Baidu? As far as the Chinese stocks go, hold your horses for now.
BYD Auto (BYDDF)
BYD is China's largest vehicle manufacturer—it also makes electric cars, plug-in hybrids, electric buses and electric heavy machinery. It also produces a lot of EV batteries used by other companies.
BYD is a very profitable company, and after a slow year of growth in 2021, it has had considerable success in 2022 on the Chinese stock market. In September, BYD almost tripled sales of their own electric vehicles and passenger cars. The Chinese giant has significantly increased its lead over Tesla. Tesla has the most pure electric cars, but BYD is quickly closing the gap.
Investing in BYD now doesn't seem like the best idea, but it's very possible the stock will stand even higher in 2025. After all, electric cars are always a good investment.
Pinduoduo (PDD)
After Alibaba and JD.com, Pinduoduo is the third-largest e-commerce company in China—but specializes in selling agricultural products. With their app, farmers can sell directly to consumers… this has revolutionized the traditional Chinese farming industry, which has been unchanged for centuries. Pinduoduo wants to open several online stores in the United States.
In September, PDD jumped sharply by almost 100%! Perhaps that's because the sales rose more than $1 billion more than expected. In the Covid-recovering Asia stock market economy, Alibaba and JD.com are having a hard time. But Pinduoduo's business, which focuses on farmer-to-farmer and farmer-to-consumer transactions, has become more popular.
Meanwhile, Pinduoduo has opened its global online marketplace, Temu, in the United States. The stock is rising, and all indications are that it will continue to rise—it's probably one of the best Chinese stocks to invest in.
Alibaba (BABA)
Alibaba probably needs no introduction. It is a Chinese IT holding company and one of the largest companies in the world. The company owns AliExpress, one of the largest stores in the world, often allowing you to buy directly from manufacturers in China. Alibaba is also involved in web hosting, artificial intelligence and financial operations.
On June 17, Alibaba shares went up on the Chinese stock market, but some of their early gains dropped, after Reuters reported that China's central bank agreed to Ali Group's request to form a financial holding company.
Alibaba's Shanghai index rating jumped in September, but the stock stabilized after the company announced a partnership with Chinese electric vehicle maker Xpeng (XPEV). Xpeng intends a computing center that will work on software for driverless cars using Alibaba's cloud.
Alibaba's stock is always worth investing in—so far, the group's investments may prove promising.
Tencent Holdings Limited (HKG: 0700)
Tencent is one of the world's largest sellers of video games and music, but is also involved in IT technology. They control companies such as Riot Games and 40% of Epic Games, and also bought out the well-known messenger Discord. The tech and entertainment group's shares have also fallen significantly this year on the Asian stock market, as has Alibaba.
Although Tencent's shares have fallen nearly 30% this year, it is still the largest Chinese company listed in Hong Kong, with a market capitalization of more than 3 trillion yuan. Global analysts assumed that Tencent would report revenues of $19.9 billion on the stock market. China is expected to increase both internal and external markets.
This was Tencent's first year-on-year sales decline since it went public in 2004. This is worrying—the entertainment industry should be immune to financial crises. That's why investors are cautious about investing in Tencent.
Summary
Even though investing in Chinese stocks can be risky, China's economy is growing much faster than the economies of countries like the US or developed countries. Therefore, it can be said that the growth of stock prices in developing countries is very promising and offers a quick ROI.
However, if you are not a Chinese citizen yourself and do not know the realities of the country or the market, investing in the Chinese stock market might be problematic. After all, you may not understand the realities of the politics and political risks facing Asia, stock market and the local industries. Therefore, for an outsider, investing in Chinese stocks is always a greater risk.
