Wall Street’s Bullish Bets: Chinese Stocks on the Rise
The Chinese stock market is witnessing a resurgence of optimism, with Wall Street analysts upgrading at least three U.S.-listed Chinese stocks to “buy” this month.
As Chinese companies report their earnings for the last quarter of 2023 and the full year, analysts find compelling reasons to turn bullish on these stocks.
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Wall Street’s Bullish Bets: Chinese Stocks on the Rise
- Optimism fueled by better-than-expected Chinese economic data and strong earnings reports.
- Stocks upgraded include Tencent Music Entertainment, Kingsoft Cloud, and Vnet Group.
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Wall Street analysts upgrade 3 U.S.-listed Chinese stocks to ‘buy’ this month.
China’s Better-than-Expected Economic Data Fuels Optimism
Despite skepticism surrounding China’s ability to meet its “around 5%” growth target for 2024 without further stimulus, the country has reported better-than-expected economic data in retail sales, industrial production, and fixed asset investment for the first two months of the year.
This positive economic data has contributed to the renewed interest in Chinese stocks.
The Chinese Stocks Catching Wall Street’s Eye
- Tencent Music Entertainment (TME)
Citi upgraded TME, one of China’s major music streaming platforms, to “buy” on Wednesday, with a price target of $13 per share, nearly 18% higher than Tuesday’s close.
TME’s fourth-quarter results beat expectations, driven by the outperformance of its online music revenues.
Citi analysts believe TME’s steady subscription music business, expanding capabilities in the music value chain, ramp-up of long-form audio, and diversified use cases across multiple channels and devices will support a sustained growth outlook.
- Kingsoft Cloud (KC)
JPMorgan upgraded the cloud services company to “overweight” on March 10, with a price target of $4.20 per share, about 30% above where Kingsoft Cloud shares closed on Tuesday.
The analysts expect the company to break even in the first quarter on an EBITDA basis and achieve break-even for the entire year of 2024 – a first for the company.
This optimistic view is based on the shift in revenue towards higher-margin sources, such as Kingsoft’s fast-growing AI business, and a decline in costs due to asset write-offs in the third quarter.
- Vnet Group (VNET)
BofA upgraded the data center operator’s stock to “buy” on Tuesday, with a $2.70 price target, more than 35% above where shares closed on Tuesday.
The analysts expect news of a local government contract and demand from short video companies to boost VNET’s revenue in the coming years. VNET already operates data centers in more than 20 cities across China.
Other Chinese Stocks on the Radar
Analysts are also finding reasons to turn incrementally optimistic about other Chinese stocks.
JPMorgan upgraded shares of video streaming and gaming company Bilibili to “neutral” on March 10, citing the company’s double-digit revenue growth target and positive operating cash flow in 2023.
Deutsche Bank analysts initiated coverage of China’s auto sector on March 8, rating five stocks as “buy”: Great Wall Motor, BYD, Seres, Li Auto, and JMC (Li Auto is the only U.S.-listed company among them).
As Chinese companies report their earnings and the country’s economic data unfolds, investors will closely watch for further signs of strength and potential catalysts that could fuel Wall Street’s bullish stance on these Chinese stocks.
