MoneyTalks is Stockhead’s regular recap of the ASX stocks, sectors and trends that fund managers and analysts are looking at right now.
Today we hear from Rob Talevski, CEO of Webull Australia about sneaking into the China shop, and what’s worth breaking once you’re inside.
For much of a crazy August a heap of the more hardcore foreign equity investors with game in China have been quickly and quietly pulling their funds out of the few blue-chip names that remain there, during what Bloomberg reckons is the longest stretch of outflows on record.
It’s not a promising signal: Now even China’s most irreproachable, state-backed industry leaders are losing the trust of their global backers.
Bloomberg believes that during a 12-day withdrawal spree, overseas funds worth the some US$9.3bn were sucked out of Chinese markets.
Foreign investors sold 6.2 billion yuan (US$850mn) of Kweichow Moutai Co. during August 7-18, making China’s largest liquor maker the most heavily sold stock via trading links with Hong Kong.
Now obviously this isn’t about me, but this is me back in my Beijing days for Guangdong TV, talking about Kweichow’s then main competitor Wuliang Yibin.
Both Chinese rice wine makers were thought to be stronger than BHP and more safe than CBA…
Gosh I was handsome, once. And so young!
Sigh.
Anyway, with China’s property woes continuing to cast a shadow over both markets and the economy, Chinese stocks in Honkers sprang up and staged a late surging fightback – the Hang Seng climbed nearly 2% snapping a 7-day losing streak – its longest since late 2021 in just a few minutes of outrageous trade.
There’s uncertainty and an underlying confidence in China operating side by side – and why not? After all this is where some of the world’s more fascinating businesses look massively oversold.
Rob’s China
So, we asked Talevski for his top three picks in these volatile times and about how a new era of online trading has opened up for wee Aussies the opportunity to engage in battle on one of the world’s more volatile equity stages.
Rob told Stockhead, once upon a time it would’ve been super difficult for an Australian self-directed retail investor to access Chinese stocks.
“However, accessing Chinese equities is now a lot easier with platforms (Ed: yes, such as Webull) providing unfettered access to both H-Shares and A-Shares.
“Our platform (Ed: yes, Webull) gives its clients access to Chinese stocks listed either via US exchanges or directly on Mainland China exchanges – all through a single brokerage account with a highly competitive FX offering. Webull offers its users the same investment tools and data sets for Chinese shares as they do for Australian and US shares.”
Taleveski says users can find heaps of information such as company profiles, company news and press releases, analyst ratings, charting and technical analysis, as well as traditional indicators such as Price Earnings ratio (P/E), Earnings Per Share (EPS), dividend yields etc.
“To help make a balanced and sound approach to their stock picking no matter the market.”
Here’s Alibaba for example…
Rob’s 3 China picks for volatile times
BYD Co –
“I believe BYD is well positioned to take advantage of global demand growth for EVs as governments across the world introduce stricter vehicle emission targets. BYD is currently second to Tesla globally for EV sales but dominated the EV market share for Mainland China throughout 2022 and 2023,” Rob says.
Over Q2, the worldwide sales of electric vehicles (EVs) has gone nuts, bulldozing past the 2.15 million unit mark.
Leading the pack were Tesla Inc (TSLA) and another company which Warren Buffett has bought heavily into – that’s the BYD Co (BYDDY) (BYDDF).
“BYD are currently in the process of opening manufacturing plants in Southeast Asia, Europe and South America, which would give them a larger geographic manufacturing footprint than Tesla,” Rob says.
“More importantly, BYD manufacture their own batteries for their EVs, unlike Tesla who ironically recently signed a deal for BYD to supply their batteries.”
The latest figures indicate an impressive 39.3% year-on-year increase in EV sales, according to TrendForce. Tesla takes the lead with a substantial market share of 21.7%, closely followed by BYD with 16.2%.
“Analyst ratings based on 26 analysts are 44% strong buy, 48% buy, and 8% recommending hold, with average price target of US$44.87. BYD is currently trading at US$28.21.”
Baidu Inc –
Baidu Inc is the Chinese language Internet search provider. It offers a Chinese language search platform on its Baidu.com website a la Google, but with Chinese state-backed characteristics.
“However, outside of its search engine, associated advertising revenue and cloud business, Baidu recently heavily invested in an AI and Autonomous Vehicle (intelligent driving) businesses, positioning it as a stock for the future,” Rob says.
The business largely operates through two segments now, Baidu Core and iQIYI.
Core mainly provides search-based, feed-based, and other online marketing services, as well as products and services from the company’s new artificial intelligence (AI) initiatives. Within Baidu Core, its product and services are categorised as Mobile Ecosystem, Baidu AI Cloud and Intelligent Driving & Other Growth Initiatives.
iQIYI is an online entertainment service provider that offers original, professionally produced and partner-generated content on its platform
“There are some valid concerns around political risk with the Chinese government’s recent crackdown on technology stocks,” Rob notes, “however this could act as upside for Baidu as an already well-established listed entity – the policies are designed to act as a barrier to limit the number of tech companies listed on exchanges, therefore preventing new competitor challenges.”
“Analyst ratings based on 39 analysts are 31% strong buy, 56% buy and 11% recommending hold with an average price target of US$177.62. Baidu is currently trading at US$124.92.”
Yum China –
“For those looking for a more traditional play with known western brands, investors should have a look at Mainland China’s operator of KFC, Pizza Hut and Taco Bell,” Rob says.
“In addition, Yum China operates a multitude of other brands, including Lavazza coffee, which runs over 13,000 stores across the mainland. Despite the slowdown in economic growth, Yum China still plans to forge ahead with opening an additional 1300 stores throughout 2023 as it seeks to capitalise on a growing youth population that is hungry for western fast-food.“
“Analyst ratings based on 27 analysts are 26% strong Buy, 59% buy, 7% hold and 7% recommending underperform with average price target of US$72.65. Yum China is currently trading at US$53.04.”
Thanks Rob, now let’s look at me again:
Only 15 years ago! WHAT HAPPENED?!
The views, information, or opinions expressed in the interviews in this article are solely those of the interviewees and do not represent the views of Stockhead. Stockhead does not provide, endorse or otherwise assume responsibility for any financial product advice contained in this article.