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5 China Stocks to Buy as Economy Recovers

Consumer sentiment surged substantially in China, according to a private survey in fresh signs that domestic demand has experienced a significant increase. This in keeping with the raft of economic data released recently as well as during last month which indicates that the economy is on a firmer footing than before. This includes encouraging data on retail sales, manufacturing and fixed asset investment.

Given these developments, the luster of the world’s second largest economy seems to have been restored. Picking select stocks which are poised to gain from a resurgent Chinese economy seems to be a good option at this point. 

Consumer Sentiment Hits 6-Month High

Fresh signs emerged that China’s domestic demand was showing resilience. The Westpac MNI China Consumer Sentiment Indicator increased from last month’s level of 115.2 to 117.1, its highest level in six months. Most of this increase was attributable to substantial increases in the current household finance and improving durable buying conditions. According to Westpac Banking Group, consumers were ready to pay more for phones, appliances and other technology related products.

Meanwhile, Standard Chartered Plc’s Small and Medium Enterprise Confidence Index increased from 56 to 56.1 in October. According to market watchers, this was an indication that the labor market was in good health and investor momentum was being sustained. Experts believe that the government will continue to provide a significant level of liquidity and utilize appropriate economic policy to prop up growth over this year.

Multiple Indicators Encouraging

Earlier this month, official data from the National Bureau of Statistics showed that growth had increased for the third successive quarter, by 6.7%. This was in line with the official target for the year. Such a reading has dispelled fears of growth falling under the 6.5% mark. Other economic indicators released recently have been equally encouraging.

For instance, the official manufacturing PMI was flat at 50.4 for September. In August, the country’s manufacturing activity had touched its best level since October 2014. Fixed asset investment rose from 8.1% to 8.2%, in line with forecasts. Retail sales increased at 10.4% on a year-over-year basis, powered by significantly high online sales.

China’s government can now focus on reining in some of the support measures which have helped boost economic activity. Attempt to cool down the country’s overheated property market seem to be already bearing fruit. New home prices declined by 3.7% in Beijing and also moved lower in Shanghai and Shenzhen.

Our Choices

Fresh data indicates that China’s economic health has improved significantly. In fact, authorities are likely to utilize such a scenario to undertake structural adjustments which are essential to sustain long term growth prospects.

Adding stocks from China may be a prudent option at this time. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.

SINA Corporation SINA is a leading provider of online media and value-added information services to global Chinese communities.

SINA has a Zacks Rank #1 (Strong Buy). The company has expected earnings growth of 43.8% for the current year. Its earnings estimate for the current year has improved by 7.5% over the last 30 days.

NetEase, Inc. NTES is the operator of an interactive online community in China.

NetEase has a Zacks Rank #1. The company has expected earnings growth of 56.8% for the current year. Its earnings estimate for the current year has improved by 3% over the last 30 days.

Alibaba Group Holding Ltd. BABA is an e-Commerce giant which caters mainly to its native market.

Alibaba’s expected earnings growth of 29.1% for the current year. Its earnings estimate for the current year has improved by 0.5% over the last 60 days. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Weibo Corporation WB is the operator of a Chinese social media platform.

Weibo has a Zacks Rank #2. The company has expected earnings growth of more than 100% for the current year. Its earnings estimate for the current year has improved by 7.7% over the last 30 days.

SORL Auto Parts, Inc. SORL is a manufacturer and distributor of automotive brake systems and related parts.

SORL Auto Parts has a Zacks Rank #2. The company has expected earnings growth of 8.7% for the current year. The forward price-to-earnings (P/E) ratio for the current financial year (F1) is 6.12, lower than the industry average of 10.76.

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SINA CORP (SINA): Free Stock Analysis Report
 
NETEASE INC (NTES): Free Stock Analysis Report
 
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