10 China Stocks that have gained 100% or more!

Institutions have been quick to change their stance on Chinese equities as Morgan Stanley recently upgraded Chinese stocks to ‘overweight’ citing reopening hopes as a bullish catalyst for the market. While investors certainly welcome the relaxing of Covid-19 measures, it would seem that there is still an element of doubt in the market as China does appear to be unprepared for the consequences of the reopening given that “China’s Rapid Covid Reversal Sparks Whiplash as Cases Surge.”

Amidst such volatility, almost 600 different Chinese stocks have gained over 100% or more! You can download the full list here.

While many of these stocks are companies that we’ve probably never heard of before, I’ll be going through the top 10 companies that have not only 2x since their 52-week low, but are also the largest in terms of market cap!

Hang Seng Index, is the bottom in?

The HSI bounced off at exactly 50% off its all-time high of 31000 forming a reverse head-and-shoulders trading pattern about a month ago. While this may not be the bottom just yet, investors typically interpret such a sign as bullish, as this comes almost in sync with China’s reopening.

Despite the change in sentiment, there is a chance that we may see some weakness in the coming days given that retracement back to the newly found linear support level could be likely given that investors may want to take some profits off the table.

What’s most interesting about the chart that is spooking investors out is how the price action has now touched the 200-day moving average (MA). This is a pivotal moment for the HSI as any bullish candlesticks breaking past this 200-day MA would then cause this point to be a strong support level for the rally ahead.

Likewise should prices fail to break past this key point, then this would most likely end up as key resistance level for investors to observe. In my opinion, such instruments don’t often stay in this “zone” for long, hence all the more to keep a keen eye on it in the days ahead.

10 China Stocks that have Gained 100% or more (Sorted by Market Cap)

China Stock	Full Ticker	Return from 52-week low	Price (12 Dec 2022)	52 Week Low	Market Cap	Sector	Industry
Pinduoduo Inc.	NASDAQ:PDD	287%	89.71	23.21	113428	Consumer Discretionary	Internet & Direct Marketing Retail
Kuaishou Technology	SEHK:1024	114%	8.7403	4.081	38785	Communication Services	Interactive Media & Services
JD Health International Inc.	SEHK:6618	156%	10.347	4.036	34599	Consumer Discretionary	Internet & Direct Marketing Retail
Sands China Ltd.	SEHK:1928	104%	3.2712	1.6067	27359	Consumer Discretionary	Hotels, Restaurants & Leisure
Longfor Group Holdings Limited	SEHK:960	314%	3.7918	0.9155	23818	Real Estate	Real Estate Management & Development
Yankuang Energy Group Company Limited	SEHK:1171	107%	3.2198	1.5586	23071	Energy	Oil, Gas & Consumable Fuels
Trip.com Group Limited	NASDAQ:TCOM	127%	32.41	14.29	20799	Consumer Discretionary	Hotels, Restaurants & Leisure
KE Holdings Inc.	NYSE:BEKE	111%	15.39	7.31	19324	Real Estate	Real Estate Management & Development
Alibaba Health Information Technology Limited	SEHK:241	213%	1.2082	0.3856	16324	Consumer Discretionary	Internet & Direct Marketing Retail
Haidilao International Holding Ltd.	SEHK:6862	107%	2.6542	1.2853	15690	Consumer Discretionary	Hotels, Restaurants & Leisure

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Travel, F&B, Hospitality Consumer Discretionary

Most of these companies would have benefited from the reopening of China in one way or another.

For stocks like Haidilao, Sands China and Trip.com, the bull case is clear where F&B along with travel, tourism, and lodging would recover almost overnight.

Strangely enough, notice how close we are to CNY when these measures were eased. Is this matter of timing or mere coincidence? Some food for thought.

Moving forward, here are some companies that I’ve further shortlisted to explain their respective bull cases.

Pinduoduo Inc. (eCommerce Consumer Discretionary)

Another clear winner is Pinduoduo Inc. (NASDAQ : PDD).

PDD is often misunderstood in the market as investors struggle to figure out what business they truly operate in. Are they supply chain disruptors or e-Commerce enablers? In actual fact, they are a little bit of everything. PDD’s business overlaps that of supply chain disruption, e-Commerce and groupbuys. More details as follows,

A large part of PDD’s appeal is the group buying function. When a user selects an item on Pinduoduo, they can choose to participate in group buying. The more people that join in, the lower the price of the item goes.

This encourages buyers to share links to the item they are buying with friends and family or over social media.

Each item has a minimum number of buyers required to complete the purchase. If that number is not met within 24 hours, then the group buy is cancelled and those who have already committed money will be refunded.

Everything you need to know about Pinduoduo, the fast-growing rival to Alibaba and JD in China

The beauty of PDD’s business model really came through during the intermittent lockdowns in China throughout 2022.

At a time where consumers are tightening their belts, PDD’s value proposition of providing basic commodities at prices below that of their competitors simply give them the much-needed advantage to beat the competition. In their recent 3Q2022 earnings call, they reported ‘a 65% increase in revenue to 35.5 billion yuan ($5 billion) and a 546% jump in net profit to 10.6 billion yuan ($1.9 billion)‘. Its no wonder their stock has more than 3x since their 52-week low of $25!

Whispers of how fast demand is falling in China (reference to excess inventory of Luxury cars such as Tesla) signal fears of a coming recession which may further solidify PDD’s value proposition in the days ahead.

Longfor Group Holdings Limited (Real Estate)

A long-time favorite amongst dividend investors, Longfor Group Holdings Limited (HKG: 0960) has most certainly benefited from the property boom in China.

They operate in the property industry where their scope covers almost every touchpoint ranging from “the development and sales of office buildings, commercial properties, residential properties and car parks in China.“

While they have rewarded shareholders generously over the years with their ever-increasing dividend yield, this came to an abrupt halt following the fallout of the Evergrande crisis where their dividend yield along with their share price took a nosedive reaching levels lower than that of their initial opening price back in 2017.

The reversal from lows of HK$10.00 back to the current price of approx. HK$25.00 has been fueled by several factors,

1. The stock was severely oversold as investors lost confidence in the company’s ability to operate following how the entire Chinese property fell into distress.
2. This sell-off caused the stock to trade at extremely attractive valuations where the PE hit a low of 3. (Currently 6)
3. Longer-term investors likely bought in during the lows of HK$10.00 which would explain the recent volume spike.

Technicals aside, the greatest change in narrative for Longfor (and the Chinese property market as a whole) would be that state-owned Chinese banks came to their aid “as part of the government’s array of efforts to bolster the long-troubled real estate sector“. Government intervention has certainly added to momentum as the new measures from the government are “set to inject hundreds of billions of yuan in new funding into the property sector.”

Bank of China, one of China’s four largest state-owned banks, offered 700 million yuan ($100.8 million) of offshore loans to Longfor. The funds were drawn down Dec. 9 to meet the developer’s liquidity needs, the lender said.

Bank of China said the loans are an important measure to implement the directions of the central bank and the China Banking and Insurance Regulatory Commission, carry out a strategic cooperation agreement with Longfor, and support the stable and healthy development of the real estate market.

Longfor Gets $101 Million of Offshore Loans From Bank of China, 14th December 2022

Alibaba Health Information Technology Limited (eCommerce Consumer Discretionary)

The Health and Pharmaceutical arm of Alibaba was a clear winner when Covid-19 first hit the world. Investors who bought in at lows of $10.00 would have had ample opportunity to ride on the momentum to 2x or 3x their capital from 2020 to 2021. However, as fears of rate hikes heightened, companies that weren’t making a profit like Alibaba Health took a hit hence the reversion from highs of HK$30s to lows of HK$3.

In such a scenario, one catalyst that could cause momentum to build again would be guidance from management with regard to when the company may breakeven. This is exactly what management did when the released a “POSITIVE PROFIT ALERT” on the 25th of October. Based on the charts, at or about the time when this report was released also seemed to be the bottom for the stock (Orange Circle) as a bull rally ensued soon after.

Fundamentally, the company does seem on track to achieve its targets as their revenue and gross profits show no signs of slowing despite the volatility in its stock price.

All in all, analysts have also stepped forward to upgrade the company with Goldman Sachs leading the way.

“We believe Alibaba Health will see relatively fast revenue growth in the next three years driven by online pharmacy amid the healthcare digital shift and leverage from [parent company] Alibaba’s… traffic flow,”

Research analysts led by Justin Kwok at investment bank Goldman Sachs said in a report dated Nov. 28 to investors.

Does the state of Covid measures in China really affect the China stock market?

“The transition out of zero-Covid will eventually allow consumer spending patterns to return to normal, but a higher risk of infection will keep in-person spending depressed for months after reopening,” Mr Mark Williams, chief Asia economist at Capital Economics

Chinese capital Beijing swings from anger over zero-Covid to coping with infections

Given how short-sighted the market has been this year, I’m quite certain that disaster would follow should the Chinese government tighten their Covid-19 measure again. As mentioned earlier, the situation is incredibly volatile as the current post-pandemic strategy that has been executed in China looks like it was put together with much haste.

The Chinese government will soon have to take a stand between normalization and the risk of higher infection rates. Should the easing of measures be rolled back, a knee-jerk reaction from the market is likely which then begs the question, how long can they keep this up?

Long or short, you decide.