Hundreds of Chinese companies are listed on U.S. markets. But which are the best Chinese stocks to buy or watch right now? JD.com (JD), Nio (Nio), Li Auto (LI), Xpeng (XPEV) and BYD Co. (BYDDF).
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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.
But with China’s crackdowns a wide array of U.S.-listed Chinese stocks spanning many industries have been hammered in 2021. Coronavirus restrictions, power shortages and global supply-chain issues have all weighed on Chinese companies.
There’s also always the risk the Chinese stocks that trade in the U.S. could be forced to delist, by either Beijing or Washington. But that wouldn’t affect BYD. Warren Buffett’s Berkshire Hathaway has a stake in the China EV and battery giant.
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 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 firm Didi Global (DIDI), beauty products maker Yatsen (YSG) or data-center operator GDS Holdings (GDS).
Beijing Crackdown On Chinese Stocks
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.
That risk has been very apparent over the past year.
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 anticompetitive actions and ordered it to change various practices.
But regulators also have gone after ride-hailing firms, video game makers for-school operators, online delivery apps, Macau casinos and online brokers. On Dec. 14, Beijing levied fines vs. social media firm Weibo for publishing illegal content. China has signaled that it’ll take a dim view of new overseas listings, especially for internet and data-centric companies. Many big U.S.-listed Chinese companies already have secondary listings in Hong Kong.
Chinese Stock Delisting Risk
A late 2020 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.
The SEC on Dec. 2, 2021 said it’s finalized a plan for moving ahead with that delisting law. As a practical matter, it could be years before delistings are an imminent threat. Still, it comes just days after Beijing denied a report that it was gearing up to largely end the structure of most overseas listings of Chinese firms.
China ride-hailing giant Didi Global (DIDI) said late on Dec. 2 that it will delist from U.S. exchanges and list instead in Hong Kong, further fueling delisting concerns.
China is tightening rules on overseas listings, but isn’t banning them outright. The securities regulator issued draft regulation to require companies listing overseas to follow domestic rules, including data privacy and cybersecurity.
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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 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 now the stock market rally is in a confirmed uptrend, but under heavy pressure.
Join IBD experts as they analyze actionable stocks in the stock market rally on IBD Live.
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 those with strong earnings growth, such as Pinduoduo stock. 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 out of favor now, with the possible exception of EV stocks. While Chinese electric vehicle makers are not immune to regulatory pressures, Beijing appears to want to foster the domestic industry.
Why This IBD Tool Simplifies The Search For Top Stocks
Best Chinese Stocks To Buy Or Watch
| Company | Ticker | Industry Group | Composite Rating |
|---|---|---|---|
| Li Auto | LI | Auto Manufacturers | 89 |
| Nio | NIO | Auto Manufacturers | 55 |
| BYD | BYDDF | Auto Manufacturers | n.a. |
| JD.com | JD | Retail-Internet | 49 |
| Xpeng | XPEV | Auto Manufacturers | 73 |
So let’s analyze these five top China stocks: Li Auto stock, Nio stock, BYD stock, Sohu stock and Weibo 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).
While still losing money, Li Auto has seen huge sales growth 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.
Beijing-based Li Auto delivered 14,087 Li One hybrid SUVs in December, up 130% vs. a year earlier. Q4 deliveries hit 35,221, well above its 30,000-32,000 target and Q3’s 25,116.
After a huge run from its July 2020 IPO to a record 47.70 on Nov. 24, 2020, Li Auto stock plunged to 15.98 in May. Shares have formed a bottoming base within that larger consolidation.
Li Auto stock rebounded above its 200-day line on Oct. 7 and reclaimed its 50-day line on Oct. 14, adding to gains on Oct. 15.
Li Auto fell modestly on Nov. 1 following its October deliveries. But a handle in its base gave it a lower official buy point of 34.93.
Following earnings on Nov. 29, Li Auto gapped as high as 36, but closed slightly below the 34.93 buy point. However, LI stock moved back above that buy point on Nov. 30.
Shares rose to a nine-month high on Dec. 1 following November delivery figures, but reversed slightly lower. On Dec. 2, Li Auto stock tumbled on a bad day for EV makers. Li Auto stock tanked on Dec. 3, as delisting fears continued to take a toll.
Li Auto stock reclaimed its 200-day line on Jan. 11 and its 50-day line on Jan. 14. Shares could have an early entry soon off a downward-sloping trendline.
Li Auto debuted on the Hong Kong exchange on Aug. 12, joining Xpeng in having a dual listing.
Li stock has an 89 IBD Composite Rating out of a best possible 99.
Bottom line: Li Auto stock is not a buy.
Nio Stock
While not as large as the diversified, profitable BYD, Nio is the most established of the Chinese EV startups. Nio has three electric vehicles, the ES8, the ES6 and the crossover EC6, but the lineup is going to expand.
Nio held its annual Nio Day on Dec. 18. The Chinese EV startup unveiled the ET5, starting at $51,450. It will have a base range of 341 miles, rising to as much as 620 miles, albeit on a very loose standard. The mid-size EV sedan is a potential competitor to the Tesla Model 3, the Xpeng P7 and P5 and the BYD Han. ET5 deliveries will begin in September 2022. Nio claimed record preorders, but gave no specifics.
Nio also will begin deliveries of the upscale ET7 sedan, unveiled at Nio Day 2020, on March 28, 2022. The Nio ET7 has a range of up to 620 miles by China’s loose standard.
Shanghai-based Nio delivered 10,489 vehicles in December, up 49.7% vs. a year earlier, but down slightly from November’s 10,878. That consisted of 1,978 ES8 large SUVs, 5,260 ES6 SUVs and 3,390 EC6 crossover SUVs. The EV maker delivered 25,034 vehicles in Q4, near the high end of of its 23,500-25,500 target. That was up slightly from 24,439 in Q3.
Nio has begun Norway deliveries for its ES8 SUV, kicking off a European expansion.
Shares peaked at 66.99 on Jan. 11, tumbling to a low of 30.73 on May 13.
Nio stock have sold off hard again, hitting a 14-month low on Dec. 29. Shares have bounced a little, but are far from actionable.
Bottom line: Nio stock is not a buy.
BYD Stock
BYD Co. is the biggest pure-play Chinese EV maker, making electric cars and buses, as well as many hybrids. It’s also a major EV battery maker. Warren Buffett’s Berkshire Hathaway (BRKB) is a longtime investor.
Notably, BYD is profitable, in sharp contrast to Li Auto, Nio and Xpeng Motors. BYD’s Q3 profit fell vs. a year earlier, while revenue rose modestly.
BYD sold 93,945 new energy vehicles in December, up 218% vs. a year earlier. That was up from 91,129 NEVs in November, but snapped a six-month streak of EV/hybrid sales rising by roughly 10,000.
China’s strict lockdown of Xi’an province affected some BYD production last month, though the company reportedly is close to normal operations again.
Of the 93,945 vehicles sold, 92,833 were personal vehicles, up 232% vs. a year earlier. EV sales reached 48,317, up 155%, while plug-in hybrid sales leapt 477% to 44,506.
BYD continues to slash sales of its traditional gas-powered cars. They fell to 5,167 in December vs. 27,481 a year earlier.
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.
BYD reportedly will unveil a new premium brand in the first half of 2022, starting with a luxury SUV crossover.
Like Nio and Xpeng, BYD has begun selling EVs in Norway, starting with the Tang SUV. Exports are likely to be a big part of BYD’s future, as production continues to ramp up sharply. BYD is gearing up to sell EVs in Australia.
BYD stock corrected nearly 52% from its January peak of 35.94 to its May 12 low of 17.41, though that’s a smaller decline than Li Auto stock.
Shares broke out of a double-bottom base with a 35.35 buy point in Oct. 15, then kept running. BYD stock hit a record 41.24 in early November, but sold off, tumbling below the 50-day line. In early January shares tumbled to the 200-day line but is rebounding again, reclaiming the 21-day line.
BYD is listed in Hong Kong and trades over the counter in the U.S. So the BYDDF stock chart is prone to lots of little gaps up and down. But it also means that BYD is at not at threat of a U.S. delisting.
Bottom line: BYD stock is not a buy.
Tesla Vs. BYD: Which Booming EV Giant Is The Better Buy?
Xpeng Stock
Xpeng makes the G3 small SUV, the P7 sedan and the smaller P5 sedan. The P5 sedan, officially launched in mid-September, is the first production car to come with Lidar. 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. Xpeng sells some G3 SUVs in Norway, and is expanding that to include some P7 sedans.
Xpeng deliveries shot up 181% to 16,000 vehicles last month, a new record after November’s 15,613. For the quarter, the Guangzhou-based startup delivered 41,751 vehicles, easily beating its Q4 target of 34,500-36,500 and vaulting above Q3’s 25,666. That included 7,459 P7 sedans, 5,030 P5 cars and 3,511 G3 and G3i smart SUVs.
XPEV stock peaked at 74.49 in November 2020, nearly tripling from an IPO base. Shares then tumbled to 22.73 in May. But after rallying for a time, Xpeng stock formed a bottoming base, with a 48.08 buy point, with 50.50 as an alternate entry.
After trading above and below that entry for several weeks, Xpeng stock roared back above the 48.08 entry on Nov. 23 following earnings. Shares reversed lower on Dec. 1 following November deliveries. XPEV stock then plunged with EV peers on Dec. 2.
Shares sold off again on Dec. 3, diving below the no-longer-valid buy point and even the 50-day line. XPEV stock is back above its 50-day line, and has just crossed a trendline entry. Investors also could use 51.50 as short-term resistance, with 56.55 the new official buy point.
Bottom line: Xpeng stock is an aggressive buy.
JD.com Stock
JD.com is a Chinese e-commerce giant. It’s showing a bit more fight than rivals such as Alibaba.
JD.com earnings fell 2% in the latest quarter, while sales grew 32% to $33.9 billion. But that topped views, unlike many China internets, including Alibaba.
JD.com stock peaked at 108.29 on Feb. 17 and bottomed at 61.65 on July 25. Since then shares have been improving, especially since early October, with a big jump starting on Nov. 12 as they reclaimed the 200-day line.
On Nov. 18-19, JD.com stock broke a long-term trend line and then cleared short-term resistance to hit an eight-month high.
But JD.com stock has plunged in December on delisting fears. On Dec. 23, shares fell hard after Tencent Holdings (TCEHY) said it’ll slash its stake in JD.com to 2.3% from 17%, giving the shares to its investors. The two internet giants will maintain close business ties.
JD.com on Dec. 29 increased its stock buyback program to $3 billion from $2 billion. Shares soared on Dec. 30 along with many other Chinese stocks. But they tumbled to a four-month low on Jan. 4. JD.com stock briefly rebounded back above its 200-day line but reversed lower after hitting resistance at its 50-day.
JD.com was added to Hong Kong’s Hang Seng Index on Dec. 6. Starting Dec. 2, MSCI began tracking JD.com via its Hong Kong shares, not its U.S. ADRs.
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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