Editor’s note: At The Smart Investor, we welcome a diversity of views. We think that it helps provide a broader level of thinking.
Last week, Royston gave his take on why he is not investing in China stocks.
This week, we have Herman take the other side of the argument, and give you reasons on why you should consider buying some Chinese stocks.
The recent spate of crackdowns on several Chinese companies has spooked investors, causing share prices of the affected businesses to tumble sharply.
In addition, uncertainty continues to linger over the regulatory environment in China.
Hence, it is no surprise that some investors are keeping their distance from Chinese companies for the foreseeable future, as sweeping regulatory reforms can be announced at any moment.
Such changes leave Chinese companies vulnerable to a sudden plunge in share price.
But where some see risk, others see opportunity.
Investors may be looking to take advantage of the current ambiguity to pick up promising Chinese companies at a discounted price.
If you are one of them, here are four Chinese stocks that should be on your radar.
Ping An Insurance (SEHK: 2318)
Ping An is a world-leading technology-powered retail financial services group.
The company offers a diverse range of financial products in categories such as insurance, property and casualty, banking, and asset management.
One of Ping An’s key strengths is the ecosystem of products it offers.
In its latest interim report for the first half of 2021, the group reported that 38.7% of its 223 million customers use multiple services that it offers.
For the six months ended 30 June 2021, the group’s corporate premiums achieved through cross-selling topped RMB 9.77 billion, a year on year increase of 21.7%.
Ping An continues to develop new technologies to improve sales and efficiency.
The group holds over 34,920 technology patent applications, and sales realized by artificial intelligence service representatives grew 54% year on year.
The company’s share price has taken a tumble recently, and it is trading at HKD 60.40, down 41.7% from its 52-week high of HKD 103.60.
Meituan (SEHK: 3690)
Meituan is China’s leading e-commerce platform for services.
The tech firm’s comprehensive range of services include car-hailing, bike-sharing, catering, travel booking and other lifestyle services.
In the company’s latest quarterly report for the three months ended 31 March 2021, Meituan reported revenue of RMB 37.02 billion, up 120.9% from the same period a year ago.
However, operating loss widened to RMB 4.77 billion in the same period, mainly due to accelerated investments to widen product offerings.
More importantly, Meituan’s user base continues to expand steadily.
As of 31 March 2021, the company boasted 569.3 million transacting users, a 26.9% jump from 448.6 million users on 31 March 2020.
Users of Meituan were also using the app more frequently, making an average of 30.5 transactions annually, growing from 26.2 transactions a year ago.
Alibaba (SEHK: 9988)
Alibaba is one of the world’s largest e-commerce and technology companies.
The Chinese technology titan operates major brands such as e-commerce giants Taobao and Lazada, video platform Youku, and leading logistics provider Cainiao Network.
Unfortunately, Alibaba is one of the poster boys for companies severely affected by government regulations.
Back in 2020, the initial public offering (IPO) of its fintech arm, Ant Group, was scuppered at the last moment after company founder Jack Ma criticised China’s financial regulations.
But aside from these regulatory concerns, the company’s growth is still looking strong.
In the quarter ended 30 June 2021, the group reported year on year revenue growth of 34%.
This growth is even more impressive considering all of Alibaba’s business segments posted double-digit revenue growth.
Bilibili (SEHK: 9626)
Bilibili is a leading gaming and video platform in China positioned for youths.
Although regulators have not targeted them directly, there have been murmurs that the government could soon crack down on the gaming industry due to the addictive nature of games.
In the meantime, however, the company’s growth continues to power on.
In its latest quarterly report, Bilibili posted total revenue of RMB 4.5 billion, a year on year increase of 72%.
In addition, average daily active users rose by 24%, and average monthly paying users grew 62% year on year.
In August 2021, the company also released 16 youth-centric video games in a bid to expand its offerings.
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Disclosure: Herman Ng owns shares in Alibaba.