Chinese stocks have been a complicated area of the market to be involved with throughout 2021 as many investors have been reducing their exposure to avoid headline risk. While the world’s second-largest economy seems to be recovering nicely from the impacts of the pandemic, these stocks have been major laggards thanks to regulatory issues and fears that some Chinese companies could be de-listed in the United States. While those are certainly both important factors to consider, it’s hard to argue against the idea that many Chinese stocks offer attractive entry points at this time due to all of the recent selling.
While investors should always consider the downsides associated with investing in emerging markets, the chance that they will be compensated with outsized returns can make it worth the added risk. We are already seeing constructive price action in Chinese stocks to start the month of June, which is why it’s not a bad idea to take a look at some of the best names to consider adding. Let’s check out 3 Chinese stocks to buy for a bounce below.
1. NIO
Last year, EV companies like Nio (NYSE:NIO) provided incredible returns to early investors thanks to all of the optimism surrounding the industry. While the stock hasn’t been able to replicate its 2020 performance this year, it’s beginning to look like a bounce is on the cards for this leading Chinese electric vehicle maker. Keep in mind that China has ambitions to become the world leader in terms of electric vehicle production and that NIO should greatly benefit from growing demand in the country over the next few years.
While NIO will have to deal with the negative impacts of the global semiconductor shortage in the near term, the fact that the company reiterated its Q2 delivery guidance and received an upgrade from Citi this week is a sign that the stock could be in for a rally in the coming trading sessions. NIO also recently announced that it is launching into Norway, its first market outside of China, and has plans to expand into five more European countries in the future. The bottom line here is that NIO is one of the best Chinese stocks to consider adding for a bounce, particularly since the stock has just reclaimed all of the major moving averages.
2. Pinduoduo
Another Chinese stock that investors might want to consider buying for a bounce is Pinduoduo (NASDAQ:PDD), a company that offers a unique e-commerce platform. The platform was designed to resemble a virtual bazaar of a broad spectrum of products and has helped the company become the third-largest e-commerce company in China by annual revenue. Consumers can find tons of different products on Pinduoduo including apparel, shoes, bags, electronics, electronic appliances, food, beverages, and more. The stock has been hit hard in 2021 after rallying over 330% last year, but there are several reasons why it’s a great rebound candidate at this time.
First, Pinduoduo reported very strong Q1 results that saw total revenues for the quarter increase by 239% year-over-year. Another noteworthy number from the Q1 report was the increase in average monthly active users, which rose by 49% year-over-year to reach 724.6 million. These figures confirm that the company is still seeing massive growth and that the earnings growth from 2020 was not an outlier. It’s also worth noting that this company has exposure to agricultural products, as Pinduoduo allows farmers to sell their produce directly to consumers on its platform. We know how strong agricultural stocks have been this year, and the fact that Pinduoduo offers exposure to that industry is another great reason to consider adding shares.
3. Up Fintech Holding
Finally, we have Up Fintech Holding (NASDAQ:TIGR) a leading online brokerage firm that is focused on global Chinese investors. The company’s trading platform helps investors with trading equities and additional financial instruments on exchanges located all over the world. The stock has been showing relative strength over the past week after reporting strong Q1 earnings results and could continue to rally higher given that it is still well off of its 52-week highs.
UP Fintech reported $81.3 million in Q1 total revenues, a 255.5% year-over-year increase, and also reported a Q1 net income of $21.1 million. Perhaps an even more important metric from the report was the fact that the total number of customers with deposits increased by 180.4% year-over-year to 376,000, confirming that people in China are very interested in using the company's platform to get involved with financial markets. Keep an eye on this one as it could be ready to break out of its 3-month long channel in the coming trading sessions.