Chinese stocks, especially in technology and tech-esque industries, have been under unprecedented pressure over the past year thanks to intense regulatory crackdowns, as well as increasing COVID cases leading to strict lockdowns.

The result has been precipitous downturns for Chinese technology stocks such as Alibaba ( BABA ), Baidu ( BIDU ) and ( JD ), which are off 61%, 38% and 31%, respectively, over the past year.

And yet …

If you’re a nimble investor and looking for stocks to buy , these and other Chinese stocks might be worth a look, given their high marks from Wall Street’s analyst community. A combination of dirt-cheap valuations and recovering business prospects has many pros looking at China as a source of bounce-back potential, even if only for short bursts at a time.

For instance, China’s Vice-Premier Liu He recently pledged support for his country’s technology sector , but Trivium China tech analyst Linghao Bao tells CNBC that this likely signals a temporary reprieve, not a sea change in China’s stance toward technology. “This is a really not a U-turn on the tech crackdown; the long-term outlook hasn’t changed yet,” he says. “Because Beijing has already come to the conclusion that it is a bad idea to let big tech companies to run wild because it creates unfair market competition … wealth will be concentrated at the top and it will start to influence politics.”

Even then, Chinese stocks still face myriad other issues. “While an easing regulatory and policy environment offers Chinese tech stocks a reprieve, significant hurdles will limit their potential further upside,” says BCA Research. “Domestic consumption remains weak, the housing market is sluggish, the online retail sector is saturated and Chinese stocks continue to face the risk of being delisted from foreign exchanges.”

A long way of saying: Chinese stocks look like a high-risk (but possibly high-reward) bet in the short term. But if you want to take a swing, you can improve your chances by listening to what the pros have to say. We’ve used the TipRanks database to look for Chinese shares with tech- and tech-esque businesses that have earned Moderate Buy or Strong Buy ratings.

Here, then, are five Chinese stocks that might be worth a closer look.

Data is as of May 25. Stocks are listed in reverse order of the amount of upside potential implied by TipRanks-surveyed analysts’ consensus price targets.

1 of 5 Tencent Holdings

Market value: $409.2 billion

TipRanks consensus price target: $44.00 (3% upside potential)*

TipRanks consensus rating: Moderate Buy

Tencent Holdings ( TCEHY , $42.57) is a Chinese internet conglomerate founded in 1998. The company’s businesses span communication and social services including Weixin and QQ, targeted advertising, cloud fintech and business services.

Like many Chinese communication stocks , Tencent stumbled during the first quarter of 2022. Revenues were flat year-over-year, at $21.3 billion, while adjusted net profits declined 23% to $4.1 billion – its steepest such drop since it went public in 2004. The company’s mobile pay offerings were hit hard by COVID-related lockdowns.

Tencent CEO Ma Huateng, while admitting to a tough first quarter, said the company “implemented cost control initiatives and rationalised certain non-core businesses, which would enable us to achieve a more optimised cost structure going forward.” Huateng added that Tencent “continued investing in strategic growth areas including enterprise software, Video Accounts and international games.”

The company is likely to have a tough 2022, says JPMorgan analyst Alex Yao, though with potential upside. Yao expects that while rising COVID cases in China could have an adverse impact on Tencent’s business segments (including non-gaming, cloud and fintech business), he anticipates the company’s online gaming business to be resilient as Tencent has “several new games in 2Q22 pipeline.”

What’s more, the analyst is optimistic that the resumption of gaming license approvals in China could be “incrementally positive to Tencent’s ads recovery in 2H22.”

TCEHY shares have roughly halved in value from their 52-week highs in June 2021, but Yao believes they’re likely to recover. The analyst believes Tencent can sustain its growth over the long term as it focuses on three strategic areas: international gaming, long-form video and software-as-a-service (SaaS). Indeed, Yao double-upgraded several Chinese stocks in May, including Tencent, to Overweight (Buy) from Underweight (Sell).The analyst community as a whole is quite bullish on the company’s stock. Using ratings of its Hong Kong-listed stock, Tencent earns 36 Strong Buys and nine Buys, versus four Holds, two Sells and no Strong Sells, according to S&P Global Market Intelligence.The Tencent American depositary receipts (ADRs) – TCEHY shares, which […]

source 5 Chinese Stocks Still Worth a ‘Ni Hao’

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