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Forbes
07-05-2025
- Business
- Forbes
Time To Buy Chinese Stocks? 3 Top Picks For Long-Term Investors
Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer are traveling to Switzerland on Thursday to meet Beijing's lead economic representative, potentially paving the way for broader trade talks. Despite ongoing tensions with the U.S. and recent tariff turbulence, Chinese stocks have demonstrated remarkable resilience in 2025. While Western markets have struggled for traction, China's market has delivered impressive gains, leaving many investors wondering: is now the opportunity to increase exposure to Chinese equities? China has been squarely in the crosshairs of U.S. President Donald Trump's administration, becoming the primary target of the recently imposed "Liberation Day" tariffs. Yet contrary to what many analysts predicted, Chinese shares have proven to be strong performers this year. The numbers tell a compelling story. The iShares MSCI China ETF (MCHI) has climbed 10.9% year-to-date, while the SPDR S&P 500 ETF (SPY) has declined 6.44%, and the iShares MSCI All-Country World Index ETF (ACWI) has fallen 1.69%. This notable outperformance has occurred despite significant headwinds. During the recent tariff tensions between April 2 and April 8, the MCHI experienced a sharp 16.5% decline, only to rebound an impressive 14.8% to current levels. By comparison, the SPY fell 12.05% during the same period and has recovered just 10.8%. Two Key Catalysts Driving China's Market Two significant catalysts appear to be propelling China's market forward in 2025: First, Beijing has unleashed an impressive array of stimulative measures designed to boost economic activity and support asset prices. These include interest rate cuts, homebuying incentives, banking liquidity injections, a possible stock-stabilization fund, and a comprehensive plan to address hidden local government debt. These policy actions represent a coordinated push to reinvigorate China's economy. Second, enthusiasm has surged around China's artificial intelligence advancements. Chinese startup DeepSeek recently launched AI models that reportedly rival U.S. counterparts but require significantly less computing power and come at a fraction of the cost. This technological advancement could potentially benefit numerous Chinese companies and trigger a broad market re-rating, particularly in the tech sector. Chinese companies are increasingly moving up the value-added chain and offering highly competitive products across various industries. While Chinese stocks have maintained attractive valuations for years, these new catalysts may provide the momentum needed for a sustained rally, with Chinese tech stocks potentially having significant upside potential. China's Response to Tariff Pressures China has previously indicated that fiscal stimulus is on the table and any sign of fiscal support to help offset the tariff impact is likely to be met positively. Beyond additional stimulus, China has already implemented strategic measures to counteract tariff pressures. The government has allowed the yuan to weaken, effectively incentivizing more exports to offset potentially lower U.S. demand. State-owned funds appear to be providing a price floor by purchasing assets during market dips. Additionally, China continues to prioritize boosting domestic consumption—a central theme that predated the tariff disputes. During recent policy meetings, Chinese officials announced specific actions to support travel, leisure, appliances, and automobile industries, signaling a commitment to maintaining economic momentum regardless of external pressures. TIANJIN, CHINA - (Photo by Zhang Peng/LightRocket via Getty Images) LightRocket via Getty Images 3 Top Chinese Stocks To Consider For investors looking to capitalize on China's market resilience, here are three compelling Chinese stocks that combine strong competitive advantages with attractive valuations for long-term investors: 1. (JD) Inc is a company principally engaged in the e-commerce business, including online retail and online marketplace mainly through its retail mobile apps. maintains a strong financial position with approximately CNY 110 billion in net cash as of December 31, 2024. The company is expected to generate positive free cash flow in the coming decade while maintaining its annual dividend policy. After previous concerns about heavy infrastructure investments impacting profitability, management has shifted focus toward growing revenue per user and expanding into lower-tier cities. This strategic pivot should allow JD to maintain positive non-GAAP net margins while improving its overall financial strength. For long-term investors, JD's established logistics network provides a sustainable competitive advantage that continues to deepen as the company expands its reach into China's vast interior markets. 2. Yum China (YUMC) Yum China Holdings Inc is a holding company principally engaged in the restaurant operation business. The company operates in several segments and significant owners of KFC and Pizza Hut. Yum China presents an attractive opportunity for patient investors. The company is forecasted to deliver a compound annual growth rate of 11% in net unit openings over the next three years, positioning it to exceed 20,000 outlets by 2026. This expansion primarily targets lower-tier cities where chained restaurants have lower penetration. Despite ongoing macroeconomic challenges, rising disposable income and evolving family dynamics support projections of approximately 1% annual growth in comparable store sales over the next several years. Long-term investors will appreciate Yum China's proven ability to adapt Western fast-food concepts to local tastes while maintaining operational excellence across a vast market. 3. Tencent Holdings (TCEHY) Tencent Holdings Ltd is an investment holding company primarily engaged in the provision of value-added services (VAS), online advertising services, as well as FinTech and business services. Tencent maintains a robust financial position with significant net cash and strong free cash flow generation capabilities, even during previous game approval halts in 2018 and 2021. The company is currently investing in artificial intelligence chips for generative AI development, supported by its healthy balance sheet. Tencent's investment portfolio exceeds CNY 900 billion, even after divesting shares in companies like Meituan and JD, providing substantial financial flexibility. For long-term investors, Tencent's ecosystem of social media, gaming, fintech, and cloud services creates multiple avenues for sustainable growth as China's digital economy continues its expansion. The Bottom Line While risks remain—including ongoing U.S.-China tensions, regulatory uncertainties, and macroeconomic challenges—Chinese stocks offer compelling value propositions in the current market environment. The combination of government stimulus, technological advancements, and company-specific strengths creates an attractive setup for long-term investors willing to weather some volatility. BEIJING, CHINA - JANUARY 15: (Photo by Mark Schiefelbein - Pool/Getty Images) Getty Images The upcoming diplomatic meetings in Switzerland between Treasury Secretary Scott Bessent, U.S. Trade Representative Jamieson Greer, and China's Vice Premier He Lifeng may signal a potential thaw in relations that could benefit Chinese equities. While the immediate outcome remains uncertain, any progress toward stabilizing the trade relationship would likely provide additional support for Chinese markets. For those looking to add Chinese exposure to their portfolios, focusing on companies with strong competitive advantages, healthy balance sheets, and alignment with government priorities may prove rewarding. The three stocks highlighted represent opportunities where fundamentals and valuations appear particularly favorable for investors with a long-term horizon. Disclosure: The author does or has held positions in the stocks mentioned. The views expressed in this article are solely the author's opinion and should not be taken as investment advice.
Forbes
04-05-2025
- Business
- Forbes
Bet Against America? This Growing 9.5% Dividend Says ‘No Way'
Flag hanging on a facade getty Are US stocks set to lose out to the rest of the world forever? That's what the press would have us believe. But we contrarian dividend investors are looking at this from a different angle. Our strategy? Buy America when the rest of the world is selling. It's worked before, and we have every reason to believe it will work now, too. So let's talk about it—and the best way to position ourselves for US stocks' next leg up, with a healthy dividend payout on the side. It's funny, but not surprising, that the moment 'sell America' became a headline earlier this year, US stocks started to recover. That said, they are still behind the rest of the world, as we can see by the performance of a popular S&P 500 index fund (in purple below) compared to the Vanguard FTSE All-World ex-US ETF (VEU), in orange. SPY Bounces Back Ycharts Note that both US and global stocks fell about the same amount when the Trump administration announced big global tariffs on April 2. But global stocks recovered more quickly in the following days. And then, last week, US stocks started to catch up. History tells us that they're likely to do much more than catch up in the long run. SPY Long Term Winner Ycharts Going back to VEU's IPO in 2007, the S&P 500 has returned 9.9% per year on average, as of this writing, while VEU returned just 3.9% annualized. This shows why buying US stocks when they lag is a winning move in the long run. We can see that more clearly when we go back to the last time the world soured on US stocks in favor of foreign alternatives, which was a bit over a year ago in February 2024. Back then, Reuters wrote, 'Investors dumped US shares, bought China in week to Wednesday.' At the time, Chinese stocks—shown in blue below by the performance of the iShares MSCI China ETF (MCHI)—were more than doubling their US cousins (in purple), which were themselves lagging global stocks (in orange) by a bit. SPY February 2024 Ycharts As we can see below by looking at Chinese stocks, that country's markets did hold their value for the rest of 2024, but US stocks surpassed those of the rest of the world and started to close the gap with Chinese stocks by the end of the year. SPY Bounces Ycharts And in the longer run, Chinese stocks trail. If we go back to MCHI's IPO in 2011, we see that it has badly lagged US and global stocks, being almost flat: SPY Wealth Creation Ycharts So, time and time again we see the same pattern: For us long-term investors, then, it makes sense to take advantage of the recent lag in US stocks to buy—and position ourselves for a bigger return over the long haul. One of the best ways to do so is through a closed-end fund (CEF) called the Liberty All Star Equity Fund (USA), which yields a rich 9.5% as I write this. USA holds well-known US large caps in a diversified portfolio, with Microsoft (MSFT), (AMZN), Visa (V), Capital One (COP) and many others as top positions. The fund also focuses on firms with strong cash flow, 'moats' in their business models that help them fend off competitors, and histories of strong returns. It also 'translates' those profits into that huge income stream for investors who buy now. Moreover, USA (in blue below) has outrun global and Chinese stocks in the last decade. USA Total Returns Ycharts USA's big dividend didn't just hold steady over this period, it grew, as the fund pays out a percentage of its net asset value (NAV, or the value of its underlying portfolio) as dividends. USA Distribution Ycharts By investing in USA, we're getting a huge and reliable income stream that stands the test of time. And now that the market has sold off, there's an opportunity to buy before we go back to the norm of American outperformance. Which brings me to the fund's discount to NAV: As I write this, USA trades around par. That makes it a good trade now. But if you want to maximize the gains you collect in addition to that huge 9.5% dividend, it could pay to wait for the next dip—and the chance to buy at a discount. Michael Foster is the Lead Research Analyst for Contrarian Outlook. For more great income ideas, click here for our latest report 'Indestructible Income: 5 Bargain Funds with Steady 8.6% Dividends.' Disclosure: none
Yahoo
05-04-2025
- Business
- Yahoo
Emerging Markets Offer Safe Haven from Trump Tariffs: Swiss Analyst
In Pictet Asset Management's April barometer, titled "Emerging market assets offer refuge from Trump tariffs," Chief Strategist Luca Paolini argues that Trump's policies give emerging markets the upper hand as trade tensions escalate. The Geneva, Switzerland-based wealth-management firm has upgraded Chinese equities to overweight from neutral, citing positive signals from the domestic economy that outweigh concerns about Trump's tariffs. Investors seeking exposure to this trend might consider the iShares MSCI China ETF (MCHI). Meanwhile, European equities were downgraded to neutral from overweight following their strong rally. Pictet remained neutral on stocks, bonds and cash overall, but expressed a preference for emerging market bonds due to their growth prospects, solid global trade and attractive yields. The firm also maintained a positive stance on gold as a hedge against geopolitical tensions. For investors seeking this exposure, the SPDR Gold Trust (GLD) provides a direct investment vehicle. This strategic shift comes as U.S. growth is expected to slow to 2% in 2025, with businesses delaying investments due to trade policy uncertainty. In contrast, China's economy is projected to grow 5.2%, supported by strong industrial production, a stabilizing housing market, and ongoing fiscal and monetary stimulus. As Trump's tariff policies create volatility in developed markets, investors may find better opportunities in emerging economies that face less direct impact and offer stronger growth potential, according to the Swiss firm's analysis. Emerging economies are projected to grow 4.3% in 2025, outpacing developed markets at 1.6%, according to the report. The iShares MSCI Emerging Markets ex China ETF (EMXC) offers exposure to these markets while excluding China for investors who want emerging market exposure with reduced Chinese concentration. Pictet maintains overweight positions in several sectors expected to perform well despite trade tensions. Communication services remain attractive due to AI-driven growth potential, with the Communication Services Select Sector SPDR Fund (XLC) offering focused exposure. Financials could benefit from strong earnings and possible Trump-led deregulation, the Pictet report said. Utilities round out Pictet's favored sectors, with the iShares U.S. Utilities ETF (IDU) providing exposure to companies that offer defensive characteristics combined with long-term electricity demand growth. The report notes that Germany and the European Union's defense and infrastructure spending improve Europe's prospects, potentially offsetting some impacts from U.S. tariffs. However, the U.K. economy continues to struggle, likely prompting rate cuts from the Bank of England. In fixed-income markets, emerging market debt presents strong opportunities. With supportive interest rates, widening growth differentials and improving global trade, Pictet has taken an overweight stance on local currency government debt and corporate bonds from these regions. The implications of these trade tensions became evident in March when Trump's tariff policies triggered a selloff in U.S. equities, with the S&P 500 suffering its worst quarterly loss in three years. European stocks, however, outperformed the U.S. by a record margin, while emerging markets demonstrated resilience, benefiting from a weaker | © Copyright 2025 All rights reserved
