Ever heard of Pinduoduo? GSX Techedu, or Bilibili? They’re among a handful of technology stocks breaking out to new highs as investors embrace China’s flourishing digital economy.
The KraneShares CSI China Internet ETF (KWEB) ripped 4 percent above its 52-week high yesterday. While most other funds rose along with the broader market, KWEB was the only big one to break its recent peak.
One catalyst for the rally was a Reuters report that Tencent wants to take a majority stake in streaming-video company Iqiyi (IQ). (IQ is “the Netflix of China.”) That lifted both IQ and Baidu (BIDU), which currently owns 56 percent of the firm.
But the bigger story is that one fear after another is melting away in a corner of the market investors cannot ignore. Last year, people worried about a trade war but that faded. Tensions have calmed again this year, especially after the Commerce Department quietly allowed U.S. firms to do business with Shenzen-based telecom giant Huawei.
As Market Insights reported early this year, global indexes are increasing their allocations to Chinese stocks. That makes it easier for big money managers to own them.
Investors also love how a massive consumer economy is emerging entirely in the digital age. Unlike the U.S., China doesn’t have to worry about closing obsolete shopping centers. That makes its companies much cleaner growth stories than domestic retailers.
10 Breakout Stocks
Most of the Chinese companies are involved in e-commerce. One is a shipper, while others provide IT services and educational content. All the companies on the list below hit new 52-week highs yesterday. They’re ranked by year-to-date percentage change.
1. GSX Techedu (GSX)
GSX Techedu (GSX) is up 137 percent in 2020. The provider of online courses and tutoring reported revenue growth of 382 percent last quarter. It follows other education companies like Tal Education (TAL) and New Oriental (EDU), both up several hundred percent in the last decade. GSX went public in June 2019. Its market cap is about $12 billion.
2. Youdao (DAO)
Youdao (DAO) is up 122 percent in 2020. It’s the newest company on the list following an initial public offering (IPO) in October. DAO is another educational company with revenue growth of about 140 percent. Its market cap is about $3 billion.
3. Bilibili (BILI)
Bilibili (BILI) is up 111 percent in 2020. The provider of entertainment videos and anime content grew 69 percent last quarter. Its market cap is about $13 billion.
4. Pinduoduo (PDD)
Pinduoduo (PDD) is up 106 percent in 2020. The company’s dynamic e-commerce platform customizes to individual user tastes and interests. PDD’s revenue grew 44 percent last quarter and its market cap is $93 billion.
5. Nio (NIO)
Nio (NIO) is up 74 percent in 2020. The “Tesla of China” saw its revenue drop 16 percent last quarter because subsidies were cut for electric cars. However, deliveries have roughly tripled in the last two months. NIO’s market cap is about $8 billion.
6. JD.com (JD)
JD.com (JD) is up 73 percent in 2020. The e-commerce company resembles Amazon.com (AMZN) and Shopify (SHOP), selling both its own products and supporting smaller merchants. Revenue grew 21 percent last quarter and its market cap is $91 billion.
7. ZTO Express (ZTO)
ZTO Express (ZTO) is up 57 percent in 2020. The delivery company’s revenue declined 14 percent last quarter after coronavirus hurt business. ZTO’s market cap is almost $29 billion.
8. Joyy (YY)
Joyy (YY) is up 53 percent in 2020. The social-media company’s revenue grew 50 percent last quarter and its market cap is about $6 billion.
9. Vshops (VIPS)
Vshops (VIPS) is up 33 percent in 2020. The online discount retailer focuses on mundane items like apparel and luggage. Coronavirus dragged down revenue 12 percent last quarter. VIPS has a market cap of about $13 billion.
10. GDS (GDS)
GDS (GDS) is up 29 percent in 2020. The operator of data centers has grown its square footage of computing space by more than 40 percent in the last year, and revenue increased 39 percent. GDS has a market cap of about $10 billion.
Disclaimer: This post is for educational purposes only. None of the stocks mentioned should be considered recommendations.
This article was written by David Russell, TradeStation Securities, Inc., part of the Monex Group Inc, published on 17/06/2020.
David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.