Is Now The Time To Buy These 3 Chinese Tech Giants?

In the past 10 years, there's been a lot of interest in investing in Chinese tech companies. Like their American counterparts, these companies are growing rapidly. Between 2012 and today, Chinese tech companies have been on a meteoric rise, and fall, mainly for regulatory reasons. And as of late, if we look at how poorly these stocks have performed, we can conclude investor confidence in Chinese tech stocks is no longer a smart way to get exposure to the Chinese economy. But, today, Chinese tech stocks are skyrocketing, in the double digits. 

So, what changed?

In the last few weeks, we’ve seen China’s COVID cases spike and lockdowns return. Also, sprinkle a little uncertainty vis-a-vis China’s links to Russia, and it’s no wonder investors are shying away. In fact, the pressure on virtually all Chinese stocks has boiled over to a selloff unseen since March of 2020.

But, it would seem that China isn’t happy with what’s happening with these valuations. As a dramatic twist, and according to a recent report from China’s financial stability and development committee, they promised to keep their stock markets stable, implement measures to boost the economy, and actively introduce market-friendly policies. 

So, if you're thinking about investing in Chinese tech companies, now might be a perfect time to either get started or jump back in. But, despite the risks, there are a lot of reasons to be bullish on the Chinese tech trade. These companies have significant revenue, profits, and growth that startups can only dream of. 

Here are 3 companies investors are buying up like hotcakes today:

Alibaba Group Holding ADR (BABA)

Alibaba (BABA) is one of the largest and most well-known Chinese tech companies and one of the most popular stocks among foreign investors as a way to get exposure to the Chinese economy. The company started out as an online marketplace but has since expanded into other areas, such as cloud computing and artificial intelligence. In fact, is often seen as a bellwether for the Chinese economy.

The company IPO’d in September 2014 through an ADR and raised $21.8 Billion US Dollars - making it one of the largest IPOs of its time. The company has been growing rapidly in recent years and has a market cap of over $200 billion. 

Further, Alibaba has been growing both top and bottom lines for years. This is certainly the hallmark of any great company.

However, Alibaba has also been embroiled in a number of controversies. In 2018, the company came under fire for allegedly allowing fake goods to be sold on its platform. Further, the company has also been criticized for being anticompetitive by the Chinese government.

Despite these controversies, Alibaba remains a strong company with lots of potential. Over the last 52 weeks, the stock traded between $73.28 and $245.69. And in pre-market trading, it’s up over 20% to $92.49.

Tencent Holdings ADR (TCEHY)

Tencent (TCEHY) is another large Chinese tech company that has been growing rapidly in recent years. The company started out as an internet service provider but has since expanded into other areas, such as social media, gaming, and artificial intelligence. Today, it owns WeChat, and ByteDance (the company behind Tik Tok). Today, Tencent now boasts a market cap of over $378 Billion US Dollars, and is one of the most popular stocks among foreign investors. 

Like Alibaba, Tencent has also been embroiled in a number of controversies. In 2017, the company was accused of violating Chinese censorship laws. The company has also been criticized for its ties to the Chinese government.

Despite these controversies, Tencent remains a strong company with a lot of potential. If you're comfortable with the risks, investing in Tencent could be a smart way to get exposure to the Chinese economy.

Tencent is up over 22% in pre-market trading, to $49.26. Furthermore, analysts currently rate Tencent a strong buy, with a rating of 4.6 - rather unchanged over the past three months. 

Jd.com Inc ADR (JD)

JD.com (JD) is another large Chinese tech company that has been growing rapidly in recent years. The company is an e-commerce platform that sells a wide variety of products, ranging from clothes to electronics, and is often seen as a competitor to Alibaba.

Today, JD.com has a market cap of $61 Billion US Dollars, making them one of the most popular stocks among foreign investors and is often seen as a way to get exposure to the Chinese economy.

Unlike Alibaba and Tencent, Jd.com hasn’t had nearly the same amount of negative publicity, nor controversies that their competitors have faced. And, JD.com remains a strong company with lots of room to grow. 

Jd.com stocks are up a whopping 27% in premarket trading to $58.64. And considering the 52-week range of $41.56 to $92.69, the company's stock could have a lot more room to grow. That said, based on all 13 indicators, Barchart's opinion currently has a 100% sell rating on this stock. 

Final thoughts

Investing in Chinese tech companies is certainly not for the faint of heart. And while significant gains could be seen over the next quarters, investors will have to weigh both regulatory and geopolitical risks that could send the stocks reeling, once again.