3 Chinese Companies That Will Rise As Lockdowns Ease In China
Some Chinese companies have already rebounded.
Precious Njoku is a Financial Writer with extensive knowledge about the stock market.
2022-06-04 11:25

As the most populous nation and second-largest economy, Chinese companies rose to become top performers in global markets, especially in 2019 and parts of 2020. The success of these Chinese companies has resulted in a booming middle class and a rise in entrepreneurial activity. However, many persons were afraid that the strict interpretation of lockdowns as practiced by the Chinese government would damper the allure of Chinese companies.
3 Chinese Companies That Will Rise As Lockdowns Ease In China
Many Chinese cities have experienced lockdowns for the best part of this year due to the Covid-19 pandemic. One of the prominent cities among them is Shanghai, which is a financial and industrial hub. Since June 1, that lockdown has been easing. Also, the capital, Beijing, is gradually easing restrictions imposed on people due to the pandemic. The lockdowns have affected production, and supply chain disruptions have resulted. But on news of easing of the lockdowns, some Chinese companies have already rebounded.

Here are three prominent Chinese companies that will rise as the lockdowns ease nationwide in China.

1 Alibaba Group Holding Ltd (NYSE: BABA)
Alibaba stock will rise based on the optimism from the easing of lockdowns. After reporting positive better-than-expected revenue recently, its stock rose by 9%. This was a reassurance to investors who are still grappling with the financial fallouts of the pandemic.

The company reported 204.05 billion yuan ($30.3 billion) revenue in Q1 2022. This beat market expectations. On the earnings call, the CEO of Alibaba Holdings, Daniel Zhang, said that the company was pursuing further global expansions and would focus on controlling operations costs. In addition, building a cloud architecture and digital infrastructure was also among its priorities.

Due to the unpredictable and uncertain environment, the company refrained from making a revenue forecast for 2022.

Alibaba is facing a lot of pressure from the Chinese government to help prop up the economy due to its influence in the retail sector. Also, the company is facing a lot of competitive pressure from other Chinese companies in the market. But above all, if you desire to hold a Chinese stock for the long term, Alibaba should be on your list.

2 Netease Inc. (NASDAQ: NTES)
As a Chinese Internet company focused on providing content-rich services, Netease has proved to be among the companies that survived the numerous disruptions due to the frequent lockdowns in China since the pandemic started. Its recent earnings report of May 24 showed that it beat market expectations despite facing several headwinds.

The first quarter of 2022 reported $7.72 earnings per share, beating market expectations and consensus, which was $6.73. In addition, the company reported a revenue of $23.56 billion, also beating the market consensus of $23.12 billion. Q1 2022 revenue rose by 14.8% year over year. Its price-to-earnings ratio is currently 25.6, which will drop further this year. Remember that a low PE company is what we need in a rising interest economy. Netease is one of my favorite Chinese stocks and honestly, I'll prefer it over Alibaba.

This international gaming, commerce, and communications company is a good buy now, and investors realize it. Moreover, the company has favorable fundamentals.

3 Baidu Inc (NASDAQ: BIDU)
Based on market optimism concerning the easing of lockdowns, Baidu is one of the companies that will receive positive market reactions. After reporting its better than expected earnings on May 26, the Chinese tech giant rallied by 14% even while the lockdowns were on. Revenue for the quarter was 28.41 billion yuan ($4.48 billion),and it beat market consensus by about $320 million.

Due to the Chinese government's regulatory interference on tech stocks last year, Baidu’s growth has been tepid for some time. Also, macroeconomic headwinds and supply chain constraints have restricted the development of the stock. But recent earnings show that the stock is ready to do a jump.

Baidu has shown that it can survive even with intense competitive pressures. As the most significant internet search engine in China, it has faced a lot of pressure from rivals such as Tencent, whose app, WeChat, captures a lot of internet traffic in China. ByteDance’s TikTok and other services are also chipping away at the company’s supremacy. But the recent earnings call shows that the company is evolving in diverse ways and would survive the pressures.

So tell us, which Chinese stocks are you looking up to and why?

Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.

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Published On
2022-06-04 11:25

About the Author
Precious Njoku is a Financial Writer with extensive knowledge about the stock market.

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