Top 5 China Stocks To Buy And Watch Now

China is the world’s No. 2 economy and home to dozens of companies that trade in the U.S. Right now, Pinduoduo parent PDD Holdings (PDD), Canadian Solar (CSIQ), BYD (BYDDF), Tencent Holdings (TCEHY) and Baidu (BIDU) are China stocks worth watching or potentially buying.

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It’s been a tough couple of years for Chinese stocks. The Covid pandemic, and Beijing’s zero-Covid policy, have slammed the economy. Meanwhile, regulatory crackdowns vs. technology and data-centric firms such as Alibaba (BABA), Tencent (TCEHY) and NetEase (NTES) have been a major headwind. The tech crackdown seems to have eased.

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.

Meanwhile, China has rolled back Covid restrictions significantly. With an end to lockdowns and other severe controls, a massive wave of infections took hold. But investors are looking beyond to brighter days ahead. With China New Year holidays out of the way, will the Chinese economy finally rebound?

While the current top China stocks to buy or watch are dominated by e-commerce plays, don’t forget EV startups such as Nio (NIO) and Li Auto (LI). Like global giant BYD (BYDDF), all are taking on Tesla (TSLA) in the world’s largest EV market.

Tencent, NetEase and search-and-AI specialist Baidu (BIDU) are other internet giants to follow.

Top Chinese Stocks To Buy Or Watch

Tencent Stock

Tencent is China’s messaging and gaming giant, with major payments exposure and with key holdings in an array of Chinese companies, including JD.com

Earnings have declined for the past four quarters, and revenue for the past two, as a big crackdown on internet platforms and new mobile games took a toll. Earnings growth is expected to return in 2023.

JD.com stock peaked at 94.46 in February 2021, tumbling to a five-year low of 23.52 on Oct. 24, 2022. Since then shares have doubled, vaulting above moving averages

Shares hit 52.88 on Jan. 27 and have pulled back. On Feb. 17, TECHY stock fell decisively below the 21-day line, not far from the 50-day and 10-week lines.

Investors could view the recent action as a handle on a deep base going back a year. Ideally, Tencent would forge a new base after its big run.

Tencent stock is listed in Hong Kong and trades over the counter in the U.S.

Bottom line: Tencent stock is not a buy.

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BYD Stock

BYD is easily the world’s largest EV maker, including fully electric battery electric vehicles (BEV) and high-mileage plug-in hybrids (PHEV). It still trails Tesla in global BEV sales, but is closing the gap.

BYD is China’s biggest BEV maker and the world’s No. 2 EV battery maker.

On Jan. 30, BYD said full-year net profit was 16 billion yuan-17 billion yuan ($2.37 billion-$2.52 billion), up 425%-458% in local currency terms. That implies Q4 net profit of 6.7 billion yuan-7.7 billion yuan ($990 million-$1.17 billion), up 1,013%-1,179% in local currency.

BYD implied Q4 revenue rose more than 115%.

Q3 BYD earnings shot up 350% in local currency terms, with adjusted profit skyrocketing 923%. Revenue leapt 116%.

On Feb. 1, BYD reported January sales of 151,341 all-electric BEVs and plug-in hybrids, up 62% vs. a year earlier but down 36% vs. December’s record 235,197 vehicles. Covid production impacts in late December continued into early January. Meanwhile, the China New Year holiday also impacted output and sales.

Production and deliveries should ramp up strongly.

The company is targeting four million NEV sales in 2023.

The EV giant is moving up the price scale from moderate priced vehicles. The BYD Seal has very similar specs to a Tesla Model 3. When the Seal launched last fall, it was substantially cheaper than a Model 3. But modest BYD price hikes and big Tesla price cuts have narrowed the gap to $600.

Its 90% Denza unit recently launched its D9 minivan starting around $50,000. The Denza unit, 10% owned by Mercedes, will launch an SUV and a crossover in spring 2023.

BYD launched its super-premium brand on Jan. 5. Yangwang, which means “look up,” unveiled an off-road SUV and a super car, both starting at 1 million yen ($145,000). It’s possible that the luxury SUV will launch in the third quarter.

But BYD is also moving toward launching the Seagull, a small hatchback that will start around $9,000. It also trimmed the price of Qin+ DM-i to start just below 100,000 yuan ($14,650), the first time it’s offered a DM-i PHEV below that key level. BYD touted big initial orders for the Qin+ DM-i, which is targeting all-gas vehicles.

BYD is in the midst of a massive global expansion, recently beginning sales in Australia, Singapore, New Zealand, Thailand, Malaysia and several European countries. Japan, India, Mexico and Malaysia among new markets in early 2023. BYD also is entering Mexico this year, as part of a big push throughout Latin America.

It’s building a factory in Thailand and will do so in Brazil.

It plans on having at least one European factory, but no official decision has been announced.

BYD makes its own chips and batteries, which helped limit supply chain issues in recent years. It supplies batteries for third-party EVs, including Ford Motor (F), Toyota (TM) and Tesla.

It’s also a big player in battery storage for home or utility-scale projects. That business may expand significantly in 2023 as battery production increases beyond BYD’s own fast-growing EV needs.

BYD announced a big energy storage project in Nevada. It’s apparently with Warren Buffett’s Berkshire Hathaway Energy.

BYD stock hit a bear-market low of 21.29 on Nov. 25, in part due to China’s lockdowns. But as curbs eased, BYDDF rebounded strongly.

BYD stock broke above the 200-day line on Jan. 26 and kept rising for a few days. Shares have tumbled back below the 200-day line. BYD stock needs to reclaim that level and perhaps forge a new base within a massive consolidation.

BYD is listed in Hong Kong and Shenzhen and trades over the counter in the U.S., so BYDDF can be prone to mini-gaps.

Warren Buffett’s Berkshire Hathaway (BRKB) has been a longtime major investor in BYD. But Berkshire has sold slices of its H-shares in BYD in nine moves, starting in late August. The latest was disclosed on Feb. 9. Berkshire still owns about 6% of BYD, based on all share classes, but has pared its stake by more than 40%.

Bottom line: BYD stock is not a buy.

Tesla Vs. BYD: Which EV Giant Is The Better Buy?

Canadian Solar Stock

While technically based in Ontario, Canada, Canadian Solar is largely a Chinese company. It makes and installs solar modules as well as developing and building solar power plants.

Canadian Solar’s earnings per share fell in 2019, 2020 and 2021, but are expected to more than double in 2022, with a 68% gain in 2023. EPS rose 494% and 167% in the latest two quarters.

CSIQ stock hit a 52-week high 47.69 on Aug. 18, but then tumbled to 27.38 on Oct. 24. Shares vaulted above their 50-day and 200-day lines on Jan. 6, breaking a steep downtrend, offering an early entry. Shares kept running for several days before pulling back, forging a handle with a new buy point of 44.17.

CSIQ stock has flirted with aggressive entries multiple times in the past few weeks, but has quickly reversed lower. That’s a common trend among solar plays.

Bottom line: CSIQ stock is not a buy.

Pinduoduo Stock

PDD Holdings, the parent company of Pinduoduo, is the No. 3 e-commerce player in China, after Alibaba and JD.com. But it’s outperformed its larger rivals in recent months, with its bargain focus appealing to consumers in a tough economy.

PDD Holdings is expanding overseas, splashing out on a Super Bowl ad to tout its U.S. e-commerce site Temu.

Sales growth has accelerated for the past three quarters, from 5% to 50%. Pinduoduo earnings spiked 256% in Q3, reported on Nov. 28.

PDD stock peaked at 212.60 in February 2021 then crashed to 23.21 on March 15, 2022. But since then, Pinduoduo stock has trended higher, in a volatile fashion.

PDD stock gapped out of a 47%-deep base on Nov. 28 following earnings, spiking 31% for the week to a 52-week high. Shares kept running higher before pulling back in early February to test the 10-week line.

It was the first 10-week line test since the late November breakout. PDD stock has bounced slightly from that level, but is struggling to move above the 21-day line. A strong move would offer an aggressive entry.

Also, PDD stock has a rare ascending base with a 106.48 buy point.

Bottom line: PDD stock is not a buy.

Baidu Stock

Baidu is China’s search engine giant, though it’s also a big player in autonomous driving. Its self-driving software is being tested in some big cities in L4 environments. Its Jidu Auto joint venture with auto giant Geely should begin deliveries in 2023.

On Feb. 7, Baidu confirmed it will open its AI chatbot “Ernie” next month.

Earnings and revenue have struggled in recent quarters. EPS rose 4% in Q3, but after four quarters of year-over-year declines. Revenue fell 9% and 8% in the past two quarters. EPS growth should improve slightly in 2023.

Q1 results are due Wednesday.

Baidu stock peaked at 354.82 in February 2021, crashing to 73.58 in October 2022. Since then, shares have nearly doubled, retaking all the key moving averages. Baidu arguably has a new base going back several months, though there was no prior uptrend.

BIDU stock gapped higher Feb. 7 on the AI chatbot news, above key resistance around 155-156. But shares fell back to close the week lower. Baidu is back above its 21-day. BIDU stock arguably now has a handle, with a 160.98 buy point. But shares have shown big gaps up and down within this handle.

Bottom line: BIDU stock is not a buy.

Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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