Tuesday, April 16, 2024

Revitalized China Stocks Poised for Breakouts in 2023

HomeStock-MarketRevitalized China Stocks Poised for Breakouts in 2023

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Investors are keeping a close eye on China stocks in 2023 as the world’s second largest economy shows signs of emerging from its economic doldrums. With China finally easing strict zero-Covid policies in late 2022, optimism grew about a Chinese economic revival. However, growth has remained uneven in recent months while the long-struggling property sector continues to decline. Despite Chinese officials vowing steps to support the economy, actual stimulus measures have been limited so far.

Meanwhile, US-China tensions loom over markets with the Biden administration blocking shipments of advanced semiconductors to China, adding to existing tariffs and restrictions. Beijing has retaliated with its own measures. Despite the challenges, several China stocks appear well-positioned for breakouts in 2023 as business conditions improve.

Leading China Stocks Flashing Buy Signals

A number of China stocks are flashing buy signals or setting up potential buying opportunities. These include electric vehicle (EV) pioneer BYD, gaming leader NetEase, e-commerce standout Pinduoduo and specialty retailer Miniso.

BYD is now the world’s top EV seller when including its popular long-range hybrid models. The Shenzhen-based company sold over 287,000 new energy vehicles in September 2022, up 43% from a year earlier. Notably, over half of those sales came from pure battery electric vehicles (BEVs).

In the third quarter of 2022, BYD topped 435,000 BEV sales, nearly matching Tesla’s deliveries over the same period. This makes BYD poised to surpass Tesla in full EV sales in the coming quarters. BYD is also expanding upmarket into premium EVs while dominating China’s massive market for affordable electric cars and hybrids.

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Overseas expansion is accelerating for BYD with record monthly EV exports in recent months. The company is constructing its first EV factory outside China in Thailand and considering potential plants in Europe and Brazil. BYD’s bold global ambitions and surging sales growth have positioned it as an emerging Tesla competitor in sustainable transportation.

After retreating from summer highs, BYD stock has found support along its key moving averages. This constructive price action has formed a new consolidation base with a buy point at 36.27. BYD remains a stock to watch for a potential breakout as sales ramp up in China and beyond.

Fellow Chinese firm NetEase is a global leader in online gaming and streaming entertainment. The company behind hit titles like Fantasy Westward Journey has delivered accelerating earnings growth in recent quarters. NetEase generates around 80% of revenues from gaming operations.

After surging over the summer, NetEase stock has formed a new base with a 110.82 buy point. Shares have rebounded strongly after testing support near the 50-day moving average. NetEase continues investing in content and exploring international expansion to drive growth. With a solid technical setup and leadership position in gaming, NTES is a China tech stock to monitor for a potential buy signal.

E-commerce Play Pinduoduo Flashes Strength

While most Chinese tech firms struggled in 2022, Pinduoduo (PDD) was a standout performer. The fast-growing online marketplace delivered robust growth last year while navigating the regulatory challenges facing China’s internet sector. Both earnings and revenues expanded by triple-digit percentages in recent quarters.

PDD operates a novel e-commerce platform linking farmers directly to urban consumers in China, bypassing traditional distributors and curtailing costs. The company also runs Temu, a U.S. shopping app that has quickly attracted millions of users with its ultra-low prices on Chinese merchandise.

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After surging over 90% in 2022, Pinduoduo stock has formed a constructive seven-month base. PDD briefly broke out above a 92.79 buy point following blowout Q2 results before pulling back. Shares have since found support at the 50-day moving average as the company sustains hypergrowth. With China reopening, Pinduoduo appears poised to capitalize on rising consumer demand in 2023.

Specialty Retailer Miniso Flashes Strength

While most retailers faced headwinds in 2022, China-based Miniso delivered standout growth. The specialty retailer known for affordably priced household goods and cosmetics saw full-year earnings more than double. Global expansion continued with over 100 new store openings in the U.S., one of Miniso’s fastest growing markets.

Trading at a modest valuation given its growth trajectory, Miniso offers exposure to China’s booming middle class and resilient consumer spending. MNSO stock surged over 40% in 2022, dramatically outperforming the S&P 500.

After breaking out of a long base in July, Miniso stock has formed a new three-month consolidation with a 29.92 buy point. MNSO has found reliable support along its key moving averages during recent market turbulence. With its unique treasure hunt shopping experience and global expansion just beginning, Miniso could remain a retail winner in 2023.

Bargain China EV Play XPeng Ready to Run?

While not yet profitable, electric vehicle maker XPeng (XPEV) is posting triple-digit sales growth in the rapidly expanding Chinese EV market. The Tesla challenger delivered over 20,000 EVs in October 2022, up 31% versus September and nearly 200% higher than the year before. The company’s new G6 SUV has proven popular with Chinese consumers.

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Despite production constraints from supply chain issues, XPeng expects over 100% sales growth in 2022 as a whole. Moreover, the company is pushing into Europe, setting the stage for further international expansion. After retreating from summer highs, XPeng stock appears to be basing along its key 50-day moving average.

With China EV sales projected to double in the next several years, XPEV could see accelerating growth as output ramps up. The stock remains over 70% below its 2021 peak. With improving fundamentals and favorable sector trends, traders are watching to see if XPeng stock can break out decisively from its recent downtrend.

Key Takeaways

  • Selected China stocks like BYD, NetEase, Pinduoduo and Miniso are showing positive technical strength and fundamentals.
  • Top EV maker BYD is on track to overtake Tesla in BEV sales as overseas expansion accelerates.
  • Gaming leader NetEase continues growing its online entertainment empire in China and beyond.
  • Pinduoduo and specialty retailer Miniso are capitalizing on China’s expanding consumer class.
  • Recovery play XPeng stock could be poised for a breakout as sales pick up momentum.

After a brutal 2022 for Chinese equities, savvy investors are watching for comeback opportunities. With an eventual economic rebound likely and consumer spending resilient, leading China stocks could be set to outperform in 2023. As global markets recalibrate to a post-Covid world, investors should keep an eye out for potential breakouts

Mezhar Alee
Mezhar Alee
Mezhar Alee is a prolific author who provides commentary and analysis on business, finance, politics, sports, and current events on his website Opportuneist. With over a decade of experience in journalism and blogging, Mezhar aims to deliver well-researched insights and thought-provoking perspectives on important local and global issues in society.

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