It was not that long ago that emerging markets and developing markets outside of the United States were in trouble. Now it seems as though the bull market fever in the United States has rekindled interest in many of the battered stock markets around the globe. This is even the case for China, which has in recent weeks started to get slightly better news that points to more of a slow global growth scenario.
24/7 Wall St. has decided to review 10 of the better known Chinese stocks that trade as American Depositary Shares (ADSs) in New York. We are looking for potential upside in each of these names, under a mild bull market scenario continuing through 2014.
The Shanghai composite is back to within 10% of a 52-week high. This may be far short of the record highs of the Down Jones Industrial Average and S&P 500 in America, but this is far better than things were looking just a few months ago.
China was referred to as the growth engine of the world for years and years. Now, GDP growth of 5% or 6% is deemed too low to sustain its own ambitions. There are still long-term concerns about China’s debt and bank loans, as well as the notion that the nation was overdeveloped and has many business districts and high-rise living buildings that were built out but have virtually no occupants.
For these stocks to continue performing well, the outlook is not based on a raging bull market. It is simply based on a stable to moderately higher stock market in 2014. Each company has its own merits, and of course each company has its own risks. Most of the stocks also have stock options that trade and can be used to limit downside risk, or for call option buyers who would rather look at options rather than the full price of shares.
These are the 10 best Chinese ADSs that 24/7 Wall St. sees for the rest of 2014 as of early June.
Baidu Inc. (NASDAQ: BIDU) is the largest search provider in China, and it has been referred to by investors as the “Google of China” for a decade or more. Baidu is supposed to also have one of the more straightforward balance sheets compared to Chinese companies. With shares above $170, the 52-week range is $88.08 to $189.34. Baidu’s market cap is a whopping $61 billion, but this is only one-sixth the size of Google, and the company is much more focused than Google in search, online activity and advertising.
Investing in Baidu is great when you get the timing right and awful if you catch a market sell-off, but this could easily reach $200 and far higher if the bull market thesis holds up into 2015.