The markets are volatile due to the ongoing geopolitical tensions and the recent interest rate hike. However, some overseas investments are gaining appeal thanks to the latest news coming out of China. For the first time in a while, companies in that market can catch their breath. There are reports that China might be easing regulations, signaling a major shift in policy. Hence, China tech stocks are making the rounds once again.
China has the world’s largest population, a rapidly growing middle class, and over 1 billion internet users. The Chinese tech sector is huge, with 301 unicorn companies (startups worth over $1 billion) and some of the most innovative companies in the world.
It’s one of the reasons for Beijing’s heavy-handed stance on the Chinese tech sector. But things are changing for the better now, and it’s not just anecdotal evidence. Amid expectations of an easing up in the restrictions by China, it seems like they’ve finally begun to ease the regulations that were put into place a few months ago. Hence, it might be why investors are looking into investing in China tech stocks.
Here is a list of China tech stocks that will do well this year:
- Alibaba (NYSE:BABA)
- JD.Com (NASDAQ:JD)
- NetEase (NASDAQ:NTES)
- TAL Education Group (NYSE:TAL)
- 360 DigiTech (NASDAQ:QFIN)
- Tencent Holdings (OTCMKTS:TCEHY)
- Noah Holdings (NYSE:NOAH)
China Tech Stocks: Alibaba (BABA)
Alibaba is a multinational e-commerce company. Founded by 18 people in 1999, the company has grown to be the largest e-commerce company in China and one of the world’s most valuable companies.
Alibaba’s business includes retail, wholesale trade and online trading services.
The Alibaba ecosystem features over 1 billion active users globally. Most of them are based in China, but there’s also many overseas users.
However, during recent times, Alibaba has hit a bit of a snag due to regulatory pressure back home. Last year, regulators slapped a $2.8 billion fine on Alibaba after a lengthy investigation found it guilty of abusing its market position for years. In addition, Alibaba recorded 10% growth in sales in the October-December period. This is the first time it has seen an increase below 20% since going public.
Hence, BABA is available at a steep discount at the moment. Alibaba has grown larger by the day, and it has been profitable for a long time. Regulatory pressure will not remain forever. The fine itself did provide some momentary hiccups, but the worst is over for the company.
JD.com is the second largest e-commerce company in China. It was founded by the Chinese entrepreneur Richard Liu Qiangdong in 2004. The company has been successful in its business operations and has a significant market share of the online retail industry in China.
This success has been attributed to its aggressive e-commerce expansion into rural China and its logistics and supply chain management investment. JD Logistics is now looking to sell up to $400 million in new shares to fund its growth. When you add that to JD’s investment, the total capital comes out at $700 million.
The rivalry between JD.com and Alibaba is not just about their battle for supremacy in China’s e-commerce market but also about who will dominate the future of retailing worldwide as Chinese consumers become more affluent and internet savvy.
On March 10, JD.com reported higher earnings than expected, but its revenue was in line with predictions. However, compared to Alibaba, its main rival, the e-commerce company fared very well. That should give it brownie points among investors looking to decide between these two e-commerce titans.
China Tech Stocks: NetEase (NTES)
NetEase is a Chinese multinational technology company that provides internet products and services. William Ding founded it in 1997. NetEase is headquartered in Beijing, China.
In the past, NetEase has been known for its web portal and gaming business. Still, now it is also moving into new areas such as artificial intelligence, smart devices and cloud computing.
The company had a lot of tough periods in the past, but their latest quarterly earnings are a positive sign that the tides might be turning. The Chinese internet and gaming provider reported its fourth-quarter net income as 5.69 billion yuan, improving massively from 975.7 million yuan from the previous year. Net revenue for the fourth quarter was $3.82 billion, up 23.3% from a year ago.
This should be exciting for investors because it shows that the company is doing well and will continue to do so in the future.
TAL Education Group (TAL)
In the last few decades, the education industry has been facing a lot of criticism for failing to keep up with the changing needs of the world. This is why TAL Education Group was founded in 1992 by educators who wanted to create a more personalized learning experience for students.
TAL Education Group provides education services for a wide age range, from kids to adults. The company offers preschool through grade 12 services and after-school programs, non-formal education for adults and continuing education programs for mid-career individuals.
Despite its size, TAL’s stock price declined last year. This is attributable to Chinese regulators heavily regulating the sector by prohibiting education companies from netting cash through equity listings. However, the mood has brightened since then, and TAL and other Chinese education stocks are in a good position.
On Feb. 21, the education company reported mixed results for the third quarter of the fiscal year 2022. Net revenues decreased by 8.8%, but due to gross margins above 50%, the company could narrow its losses. In addition, in the first nine months of this fiscal year, revenues increased by 22.9%. This is a very healthy figure.
Overall, as the pandemic recedes and people go back to their normal routines, TAL is poised to do very well.
China Tech Stocks: 360 DigiTech (QFIN)
Fintech companies are changing how we think about banking, insurance, investments, payments, etc. They are revolutionizing these industries with innovative products and services that were previously impossible due to legacy systems or regulations.
One company leading to the charge in this new landscape is 360 DigiTech, a powerful and data-driven platform that offers digital solutions to business owners. You can use AI to execute trades and manage risk more efficiently than humans could do, freeing up human capital for other tasks that are not automated yet. Therefore, 360 DigiTech is at a distinct advantage compared to its peers.
The company operates in several segments. In recent years, the firm has been looking to shift its lending toward less capital-intensive business segments. In doing so, it can leverage its AI capabilities, bringing down costs and reducing risk.
The move is paying dividends. In the last three months of last year, the total number of loans originated rose by 40.4% to 96.90 billion yuan, compared to 69.05 billion yuan during the same quarter in 2020. Lending is becoming leaner from a capital-light standpoint; 53.5% of all loans are coming from this segment, which is 120% higher than it was the previous year.
However, due to China’s generally rough regulatory environment last year, the stock lost a lot of steam. Still, with things looking to settle down, the time to purchase QFIN shares is now.
Tencent Holdings (TCEHY)
Tencent is a Chinese multinational investment holding conglomerate that operates in social media, video games, internet services and telecommunications. It is one of the world’s largest internet and technology companies.
As a diversified conglomerate, Tencent has many industries it operates in, with varying degrees of control. Tencent operates Tencent QQ and WeChat, and QQ.com. It also owns Tencent Music and stakes in video game developers Riot Games, Epic Games and Bluehole.
You can be sure that your investment is safe with such a diverse portfolio at its fingertips.
China Tech Stocks: Huya (NOAH)
HUYA is a China-based online games company that provides live streaming and online gaming services. It is the largest live game streaming platform in China and one of the largest in the world.
Huya’s mission is to become the world’s leading interactive entertainment service for gamers.
In Q3 2021, Huya had 85.1 million monthly mobile active users, up 15% yearly. Huya also has partnerships with Tencent Games, Activision Blizzard (NASDAQ:ATVI) and Riot Games, among others, to stream their games on the platform.
By the end of 2021, China had 703.4 million live streaming users, which means a 68.2% of all internet users in China are active live streamers. With so many people using Huya, there is massive potential that it could add other games to its service and take advantage of the huge addressable market.
On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.