Three Chinese Tech Stocks to Watch as Regulations Ease

Over the past 18 months, Chinese regulators have passed new regulations and imposed fines on numerous sectors, including education, gaming, ride-hailing, and food delivery, crushing the market cap of many of the country’s leading companies.   But after positive comments from China’s economic czar, Vice Premier Liu He, investors are cautiously eyeing beaten-down Chinese tech stocks.

During the Tuesday meeting with the country’s most significant tech CEOs, China’s Vice Premier said that Beijing would encourage the further development of digital platforms and that regulators would try to “properly manage” the relationship between the government and the market.  China’s Vice Premier also said that Beijing would support more public listings of China’s tech companies, both domestically and overseas. 

With the worst of China’s regulatory crackdown seemingly in the rearview, here are three of the top Chinese tech stocks to watch in the coming weeks. 

Founded in 2015, Pinduoduo (PDD) is one of the fastest-growing tech companies in the world.  The agriculture-focused e-commerce platform directly connects more than 12 million farmers with distributors and consumers through its interactive shopping experience, allowing users to participate in group buying deals.

In 2017, the company ended its online direct sales model and transitioned to purely providing online marketplace services to third-party merchants across more categories.  According to Pinduoduo‘s July 2018 prospectus, this change from a first party to a third party marked the start of explosive growth.  From there, Duo Duo Live was launched in December 2019 as a live streaming feature available for merchants to better promote their wares.  Duo Duo Grocery, a next-day, click-and-collect grocery service, was rolled out in August 2020 as a response to the changing consumer needs for buying groceries in the wake of the COVID-19 pandemic.

Since its Feb 2021 peak, PDD’s share price is down more than 80%.  The stock garners a solid Buy rating from the Wall Street pros offering recommendations and a median price target of $59, representing a 44% increase from Friday’s closing price.

As one of the leading e-commerce giants in China, Alibaba Group (BABA) has an Amazon-like ingrained foothold among China’s consumers, but it trades at less than 25 times forward earnings, a much better valuation compared to Amazon

Over the last few years, the company has transformed itself from a traditional e-commerce company to a conglomerate with businesses ranging from logistics and food delivery to cloud computing, represented by, Taobao, and Tmall. The company’s businesses account for more than half of all online retail sales in China, one of the world’s fastest-growing e-commerce markets. Taobao is one of Alibaba’s most profitable marketplaces that accounts for more than 80% of its sales, thanks to soaring demand for high-quality imported brands in China. The company is well-positioned in the New Retail space, where it aims to bring together digital payments, e-commerce, food delivery, and other parts of the business into one extensive ecosystem. 

Since its October 2020 peak, BABA’s share price is down more than 71%.  The stock garners a solid Buy rating from the Wall Street pros offering recommendations and a median price target of $153.50, representing a 75% increase from Friday’s closing price.

NetEase Inc (NTES) develops and operates mobile and PC games, communities, and eCommerce platforms.  Its titles include some of the most popular games in China, such as the Westward Journey series, Ghost, and partnering with Activision Blizzard (ATVI) to deliver Chinese versions of Blizzard games to its users. 

NetEase became a public company in 2000.  Since then, the video game industry has gone from a $20 billion industry to be worth nearly $200 billion.  NTES has ridden this wave to become one of the most valuable video game companies in the world.  It’s looking to maintain its standing as one of the leading gaming companies in China with new products, including a VR-based, open-world, role-playing game that is highly anticipated by the gaming community. The company’s leading position in the video game market is expected to grow at a double-digit CAGR over the next decade.  Since its Feb 2021 peak, NTES’s share price is down more than 30%.  The stock garners a solid Buy rating from the Wall Street pros offering recommendations and a median price target of $123.79, representing a 27% increase from Friday’s closing price.

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