China’s decision to reopen its economy offers us opportunities to invest in undervalued Chinese stocks. In fact, with that key headwind out of the way, many investors have been betting on a resurgence in growth among some of China’s most undervalued stocks. Of course, many financial experts are also urging investors to be cautious. That’s because the reopening of China’s economy could potentially cause inflation. This happened in the US when money velocity accelerated in 2022. Thus, it is an important factor to consider investing in cheap Chinese stocks. With that said, here are the three top undervalued Chinese stocks I’ve got on my radar right now.
Alibaba (BABA)
First on this list of undervalued Chinese stocks is none other than Alibaba (NYSE:BABA), a Chinese e-commerce company with a thriving cloud business. Despite its discounted price, it is considered a low-risk investment. Its shares had reached over $300 in 2020, but had dipped to as low as $63 in late 2021. However, shares have rebounded by 14% since then, despite a recent dip.
Prior to the U.S., Alibaba Group said it would release its audited earnings statements for the period and the year concluded March 31, 2023. market opens on May 18, 2023. A conference call to discuss the financial results will be held at 7:30 a.m. U.S. Eastern Time (7:30 p.m. Hong Kong Time) on the same day. In its fiscal year 2022, Alibaba served nearly 900 e-commerce clients, processing over $1 trillion in transactions. With its Alibaba Cloud, the corporation also holds a commanding 37% of the Chinese market, rendering it the dominating competitor in the sector.
Investing in Alibaba is a promising opportunity, with China’s huge market and population providing a significant advantage. When it concerns the scope of China’s online shopping marketplace, the figures speak for themselves. As China reopens, Alibaba’s revenue prospects look bright, with strong growth expected. Additionally, as China’s global influence expands, Alibaba’s growth prospects are likely to grow stronger.
Baidu (BIDU)
Baidu (NASDAQ:BIDU) could be a viable option to explore. This Chinese tech giant recently launched the ERNIE Bot, which is a large language model that understands human intentions and provides precise responses that mimic human-like fluency. It’s a game-changing innovation that highlights Baidu’s cutting-edge capabilities.
Baidu, known as the “Google of China,” is developing its own AI solutions and has not faced the same pressure from the Chinese government as Alibaba. While Alibaba is considering breaking up its businesses, Baidu is focused on leveraging AI in its search and autonomous driving units. As the sixth-most popular website globally, Baidu’s position in China provides a significant advantage, as Google is not allowed in the country.
In addition, investors who are okay with Chinese stocks can purchase a company that is expected to produce double-digit earnings and revenue growth in 2022 and 2023 for approximately 13 times earnings.
BYD Co. (BYDDF)
China’s most significant electric vehicle (EV) manufacturer is BYD Co. (OTCMKTS:BYDDF), which has now surpassed all other automakers in region. In the first quarter, BYD witnessed a 411% YoY surge in net profit, while revenue increased by almost 80%. However, Q1 earnings and sales were significantly lower compared to Q4 2022, which could be due to the seasonally slow period of the first quarter due to the Chinese New Year and higher R&D spending. Additionally, the company was affected by a competitive pricing environment for EVs in China.
BYD is looking to boost sales with new car models such as the Seagull, which is priced at around $10,700. With EVs ranging from $11,000 to $160,000, the company is expanding its production capacity with new factories being built in Thailand and Vietnam, with rumors of potential plants in Brazil, Europe, and Indonesia.
On the date of publication, Chris MacDonald has a position in BABA, BIDU. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.