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In this article, we discuss 10 cheap Chinese stocks to buy now. If you want to see more stocks in this selection, check out 5 Cheap Chinese Stocks To Buy Now.
The Chinese market is looking bleak as President Xi Jinping enforces Covid Zero initiatives just as investors were rejoicing a rally in stocks. Wuhan City’s central districts are reportedly under lockdown as part of the Chinese president’s relentless pursuit in controlling the virus. Chinese stocks are one of the worst performers this year, and the state’s recent announcements have dimmed the anticipation of a pivot in the markets. While China has underperformed this year, the valuations of Chinese equities are at an all-time low, offering a buying opportunity for investors who would like exposure to one of the world’s largest economies at a discount.
To put this in perspective, the MSCI China index is presently trading at a price/earnings ratio of about 8.5, according to Bloomberg data. This is comparable to a 10-year average of 13 times. If the present average was to return to the historic 10-year valuation, it implies about 50% upside in Chinese equities. Bloomberg Intelligence strategist Marvin M Chen highlighted that two of China’s leading tech firms, Alibaba Group Holding Limited (NYSE:BABA) and Tencent Holdings Limited (OTC:TCEHY), are trading on historically low price/earnings ratios of about 8 and 14, respectively. In comparison, these stocks had P/E ratios of around 30 around two years ago.
Despite China’s zero-COVID policies threatening to erode consumer and investor confidence yet again, China’s central bank and foreign-exchange regulator announced on October 23 that despite lockdowns in select cities to prevent the virus from spreading, the state would focus on maintaining strong stock and bond markets. The China Securities Regulatory Commission supported this claim in a separate statement, saying that it will promote capital markets that are “regulated, transparent, open, robust and resilient.”
Traders who do not wish to invest significant amounts of money in the Chinese market amid a risky backdrop, yet want exposure to the economy in anticipation of an eventual rebound, can pick up cheap Chinese equities like NIO Inc. (NYSE:NIO), Li Auto Inc. (NASDAQ:LI), and KE Holdings Inc. (NYSE:BEKE).
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Our Methodology
We selected the following Chinese stocks based on positive analyst ratings and future growth potential. These stocks were priced under $30 as of October 25. We have arranged the list according to the hedge fund sentiment around the securities, which was assessed from Insider Monkey’s Q2 2022 database of about 900 elite hedge funds.
Cheap Chinese Stocks To Buy Now
10. Lufax Holding Ltd (NYSE:LU)
Number of Hedge Fund Holders: 15
Share Price as of October 25: $1.52
Lufax Holding Ltd (NYSE:LU) was founded in 2005 and is headquartered in Shanghai, China. The company offers a technology-led personal financial services platform in China, specializing in wealth management, consumer finance loans, retail credit facilitation services, and technology empowerment solutions for financial institutions. On October 11, Lufax Holding Ltd (NYSE:LU) declared a $0.17 per share semi-annual dividend, which is payable on October 28 to shareholders of record on October 13. The company delivers a dividend yield of 11.30% as of October 25.
On September 29, China Renaissance analyst Cindy Wang initiated coverage of Lufax Holding Ltd (NYSE:LU) with a Hold rating and a $3.10 price target. The analyst said the prolonged regulatory overhang on China online lenders will likely end by mid-2023. Unit economics indicate a sector recovery as improving asset quality and reduced funding costs should offset gradual decline in APR, the analyst told investors in a research note.
According to Insider Monkey’s second quarter database, 15 hedge funds held stakes worth $273 million in Lufax Holding Ltd (NYSE:LU), compared to 12 funds in the prior quarter worth $222.6 million. Thomas Steyer’s Farallon Capital is the leading position holder in the company, with 23.7 million shares valued at $142.4 million.
Like NIO Inc. (NYSE:NIO), Li Auto Inc. (NASDAQ:LI), and KE Holdings Inc. (NYSE:BEKE), Lufax Holding Ltd (NYSE:LU) is one of the best cheap Chinese stocks to consider.
9. ZTO Express (Cayman) Inc. (NYSE:ZTO)
Number of Hedge Fund Holders: 17
Share Price as of October 25: $17.60
ZTO Express (Cayman) Inc. (NYSE:ZTO) is a Shanghai-based provider of express delivery and other value-added logistics services in the People's Republic of China. The company serves e-commerce and traditional merchants. On August 25, Morgan Stanley analyst Qianlei Fan called ZTO Express (Cayman) Inc. (NYSE:ZTO) a "Research Tactical Idea", citing the share price declines and the view that the share price will increase in absolute terms over the next 60 days. The analyst sees controlled fundamental effects from the announced convertible notes issuance and thinks the share price correction has "led to a good entry point". The analyst maintained an Overweight rating and a $38.80 price target on ZTO Express (Cayman) Inc. (NYSE:ZTO) shares.
According to Insider Monkey’s data, 17 hedge funds were long ZTO Express (Cayman) Inc. (NYSE:ZTO) at the end of June 2022, compared to 26 funds in the last quarter. It is one of the best cheap Chinese stocks to invest in according to smart investors. Kerr Neilson’s Platinum Asset Management is the leading position holder in the company, with 15.3 million shares worth $420.60 million.
8. Weibo Corporation (NASDAQ:WB)
Number of Hedge Fund Holders: 21
Share Price as of October 25: $11.44
Weibo Corporation (NASDAQ:WB) is a Beijing-based company that operates as a social media platform in the People's Republic of China. It operates in two segments – Advertising and Marketing Services and Value-Added Services. On October 18, Jefferies analyst Thomas Chong reiterated a Buy recommendation on Weibo Corporation (NASDAQ:WB) but trimmed the price target on the shares to $32.60 from $37. He expects Weibo Corporation (NASDAQ:WB) to execute on its guidance and he maintained his revenue and non-GAAP earnings estimates for the third quarter. However, his price target change reflects the latest industry developments and exchange rate impact. Weibo Corporation (NASDAQ:WB) is one of the top cheap Chinese stocks to buy now.
According to Insider Monkey’s second quarter database, 21 hedge funds held stakes worth $167.45 million in Weibo Corporation (NASDAQ:WB), compared to 14 funds in the preceding quarter worth $87 million. Ahmet Okumus’ RPD Fund Management is the largest stakeholder of the company, with 2.7 million shares valued at $64 million.
7. New Oriental Education & Technology Group Inc. (NYSE:EDU)
Number of Hedge Fund Holders: 22
Share Price as of October 25: $21.00
Next on our list of the best cheap Chinese stocks to buy now is New Oriental Education & Technology Group Inc. (NYSE:EDU), a Beijing-based company that provides private educational services under the New Oriental brand in China. The company operates through Educational Services and Test Preparation Courses, Online Education and Other Services, Overseas Study Consulting Services, and Others segments. New Oriental Education & Technology Group Inc. (NYSE:EDU) has exceeded EPS estimates 63% of the time and revenue estimates 100% of the time in the last two years.
On July 29, BofA analyst Lucy Yu upgraded New Oriental Education & Technology Group Inc. (NYSE:EDU) to Buy from Neutral with a price target of $36.60, up from $18.80. Fiscal 2023 is likely to "market a year of a new start," the analyst told investors in a research note. The present share price is on par with New Oriental Education & Technology Group Inc. (NYSE:EDU)’s new cash and does not factor in a recovery from the March quarter trough, noted the analyst.
According to Insider Monkey’s data, 22 hedge funds held stakes worth $721.30 million in New Oriental Education & Technology Group Inc. (NYSE:EDU) at the end of June 2022, compared to 23 funds in the prior quarter worth $260 million. Seth Klarman’s Baupost Group is the biggest position holder in the company, with 8 million shares valued at nearly $163 million.
Here is what Polen International Growth has to say about New Oriental Education & Technology Group Inc. (NYSE:EDU) in its Q3 2021 investor letter:
“The quarter’s leading detractors were Chinese companies that were impacted by the CCP’s regulatory crackdown and liquidity concerns at property developer Evergrande. New Oriental Education—the largest provider of private educational services in China—moved sharply lower in July after policymakers implemented new rules which effectively turned Chinese tutoring companies into non-profits. Looking at New Oriental Education, we closed our position as soon as government policy became clear and used the proceeds to allocate to existing holdings.”
6. XPeng Inc. (NYSE:XPEV)
Number of Hedge Fund Holders: 24
Share Price as of October 25: $7.96
XPeng Inc. (NYSE:XPEV) was founded in 2015 and is headquartered in Guangzhou, China. The company designs, develops, manufactures, and markets smart electric vehicles. XPeng Inc. (NYSE:XPEV) is planning to restructure its business to improve operational efficiency and cut costs. It is one of the top cheap Chinese stocks to invest in.
On September 22, Morgan Stanley analyst Tim Hsaio reiterated an Overweight rating and a $41 price target on XPeng Inc. (NYSE:XPEV) shares after the company revealed the pricing and specifications for its G9 Flagship SUV in the Chinese market. The G9's starting price came in slightly higher than market forecasts, but "investors in general reckon the price of G9 is not aggressive enough to upstage peers' models," said the analyst. He believes XPeng Inc. (NYSE:XPEV) provided an "upbeat volume outlook" and the company expects G9 volume next year to exceed what it has achieved for the P7 model.
Among the hedge funds tracked by Insider Monkey, 24 funds reported owning stakes worth $618.6 million in XPeng Inc. (NYSE:XPEV) at the end of the second quarter of 2022, compared to 26 funds in the last quarter worth $783.8 million. Chase Coleman’s Tiger Global Management is the largest shareholder of the company, with 4.35 million shares valued at $138.2 million.
In addition to NIO Inc. (NYSE:NIO), Li Auto Inc. (NASDAQ:LI), and KE Holdings Inc. (NYSE:BEKE), XPeng Inc. (NYSE:XPEV) is one of the best affordable stocks for exposure to the Chinese economy.
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Disclosure: None. 10 Cheap Chinese Stocks To Buy Now is originally published on Insider Monkey.
