In this article, we discuss 12 best Asian stocks to buy heading into 2023. If you want to see more stocks in this selection, check out 5 Best Asian Stocks To Buy Heading Into 2023.
On November 21, Citigroup became increasingly bullish on Chinese equities, upgrading Hong Kong to Overweight in Asia, noting that Beijing’s changes in Covid Zero policies should boost earnings. Similarly, the government's support to elevate the property sector will support Chinese stocks as well. President Xi Jinping’s rigid policies have shifted, which has turned the market in New York and London bullish on Asia. Robert Buckland, a strategist at Citi, wrote in a note on November 20:
“Reopening — along with support for the property sector — should help stabilize the current China EPS downturn and support investor sentiment. China could offer an attractive domestic-driven recovery story even as other major economies are slowing sharply.”
Similarly, Morgan Stanley, which has been cautious about the Asian region for most of this year, raised its estimates for China’s stocks last week, forecasting the MSCI China Index to rally 14% by the conclusion of next year. Bank of America has also become optimistic about China, where some primary equity gauges lost more than a third of their value this year through October, making them the world’s biggest losers.
JPMorgan Chase moved even quicker than the other Wall Street experts, naming the Chinese market downturn a buying opportunity in late October. This is a massive shift from JPMorgan’s “uninvestable” tag for Chinese internet firms at the beginning of 2022. Some of the best Chinese stocks to buy for 2023 include Alibaba Group Holding Limited (NYSE:BABA), JD.com, Inc. (NASDAQ:JD), and Pinduoduo Inc. (NASDAQ:PDD).
Our Methodology
We selected the following Chinese stocks based on positive analyst coverage, strong business fundamentals, and future growth prospects. We have assessed the hedge fund sentiment from Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022.
Tencent Music Entertainment Group (NYSE:TME) is headquartered in Shenzhen, China, and it operates online music entertainment platforms to provide music streaming, online karaoke, and live streaming services in the People's Republic of China. On November 15, Tencent Music Entertainment Group (NYSE:TME) reported a Q3 non-GAAP EPADS of $0.12 and a revenue of $1.04 billion, outperforming Wall Street estimates by $0.02 and $49.33 million, respectively. Gross margin for the third quarter of 2022 rose by 3.0% to 32.6% from 29.6% in the same period of 2021.
On November 22, JPMorgan analyst Alex Yao upgraded Tencent Music Entertainment Group (NYSE:TME) to Overweight from Neutral with a price target of $7.70, up from $4.80. The analyst noted that online music "has finally become a key financial driver" for the company, given a "multi-dimensional monetization model and efficiency improvement." The analyst now forecasts Tencent Music Entertainment Group (NYSE:TME) to report mid-to-high double-digit earnings growth in the next three quarters.
According to Insider Monkey’s data, 17 hedge funds were long Tencent Music Entertainment Group (NYSE:TME) at the end of Q3 2022, compared to 14 funds in the prior quarter. John Overdeck and David Siegel’s Two Sigma Advisors is the largest stakeholder of the company, with 6.5 million shares worth $26.5 million.
Like Alibaba Group Holding Limited (NYSE:BABA), JD.com, Inc. (NASDAQ:JD), and Pinduoduo Inc. (NASDAQ:PDD), Tencent Music Entertainment Group (NYSE:TME) is one of the best Asian stocks to buy heading into 2023.
Bireme Capital made the following comment about Tencent Music Entertainment Group (NYSE:TME) in its Q3 2022 investor letter:
“We made a few material trades in the quarter. First, we sold our stake in Tencent Music Entertainment Group (NYSE:TME), which we wrote about in our “CIO Corner” newsletter.
We sold our stake primarily because of the massive underperformance of TME’s “Social Entertainment” segment. That portion of the business, which operates primarily through a group karaoke app called WeSing, lost 27% of its users during the year that we owned the stock. This seems to have been caused primarily by competition from other streaming platforms, such as TikTok (Douyin in China), a risk which we underestimated. Since this segment produces essentially all of TME’s profits, the loss of users had a dramatic impact on our valuation of the business.
Secondarily, we had expected growth of Average Revenue Per User (ARPU) in their music subscription business, in which TME has 70% share in China. Despite this near monopoly, competition from upstart NetEase Cloud Music has been fierce. Over the last year, NetEase gained material market share by offering discounts of 15-20% off the standard 8 RMB monthly price. TME has been forced to respond in kind, and TME’s ARPU fell 11% YoY in the second quarter.
With users falling dramatically in Social Entertainment and ARPU growth in question in Online Music, there was simply nothing left to support our original bullish stance on the stock. Even the fall from $6 at the end of 2021 to $4 per share in July was not enough to compensate for this change in our assessed value, so we sold our position.”
Kanzhun Limited (NASDAQ:BZ) is a Beijing-based company that operates an online recruitment platform, BOSS Zhipin, in the People's Republic of China. Its recruitment platform facilitates the recruitment process between job candidates and employers. It is one of the best Chinese stocks to invest in. In the first week of November, Kanzhun Limited (NASDAQ:BZ) stock jumped from the decliners list to land the top spot among the week's winners.
On November 14, Goldman Sachs analyst Timothy Zhao upgraded Kanzhun Limited (NASDAQ:BZ) to Buy from Neutral but trimmed the price target to $23 from $27.50. Kanzhun Limited (NASDAQ:BZ) owns China's biggest online recruitment platform, Boss Zhipin, and the analyst believes the company reached an inflection point in Q3. He forecasts accelerating revenue growth and a sequential cash billings increase over the next 12-18 months.
According to Insider Monkey’s Q3 data, 19 hedge funds were long Kanzhun Limited (NASDAQ:BZ), compared to 25 funds in the earlier quarter. Chase Coleman’s Tiger Global Management is the largest stakeholder of the company, with 17.8 million shares worth close to $301 million.
Li Auto Inc. (NASDAQ:LI) was founded in 2015 and is headquartered in Beijing, China. The company designs, develops, manufactures, and commercializes new energy vehicles in the People's Republic of China. On November 1, Li Auto Inc. (NASDAQ:LI) announced that it has delivered 10,052 vehicles in October 2022, up 31.4% year-over-year. The cumulative deliveries of Li Auto vehicles reached 221,067 as of the end of October.
On October 28, Barclays analyst Jiong Shao maintained an Overweight rating on Li Auto Inc. (NASDAQ:LI) but lowered the price target on the shares to $25 from $40. The analyst updated estimates and 12-month price targets for all the Chinese tech and internet companies under the firm's observation heading into year-end 2022.
According to Insider Monkey’s third quarter database, Li Auto Inc. (NASDAQ:LI) was part of 20 hedge fund portfolios, compared to 28 in the prior quarter. Jim Simons’ Renaissance Technologies is the largest stakeholder of the company, with 12.4 million shares worth $285.7 million.
NetEase, Inc. (NASDAQ:NTES) is headquartered in Hangzhou, China, and the company provides online services consisting of diverse content, community, communication, and commerce in the Peoples' Republic of China and internationally. The company operates through Online Game Services, Youdao, Cloud Music, and Innovative Businesses and Others segments. NetEase, Inc. (NASDAQ:NTES) is one of the best Chinese stocks to consider. On November 17, NetEase, Inc. (NASDAQ:NTES) reported a Q3 non-GAAP EPADS of $1.61, which outperformed Wall Street estimates by $0.56. The gross profit was $1.9 billion, an increase of 16.4% compared to the third quarter of 2021.
On November 18, Citi analyst Alicia Yap raised the price target on NetEase, Inc. (NASDAQ:NTES) to $100 from $98 and kept a Buy rating on the shares. The company reported "solid" Q3 results and has strong self-development capability and cash flow generation, the analyst told investors in a research note.
According to Insider Monkey’s data, 24 hedge funds were bullish on NetEase, Inc. (NASDAQ:NTES) at the end of September 2022, compared to 26 funds in the prior quarter. William B. Gray’s Orbis Investment Management is the largest stakeholder of the company, with 3.6 million shares worth $274.6 million.
ZTO Express (Cayman) Inc. (NYSE:ZTO) is a Shanghai-based provider of express delivery and other value-added logistics services in the People's Republic of China, serving e-commerce and traditional merchants. On November 17, ZTO Express (Cayman) Inc. (NYSE:ZTO) announced that it will pursue voluntary conversion to dual-primary listing on the Main Board of the Hong Kong Stock Exchange.
On November 21, ZTO Express (Cayman) Inc. (NYSE:ZTO) announced that its board of directors authorized the increase in its share repurchase program to $1.5 billion from $1 billion. The company also stretched the time of the share buyback by one year until June 30, 2024.
HSBC analyst Parash Jain on November 23 maintained a Buy recommendation on ZTO Express (Cayman) Inc. (NYSE:ZTO) but trimmed the price target on the shares to $33 from $36. Despite COVID-19 constraints, ZTO Express (Cayman) Inc. (NYSE:ZTO) experienced quicker volume growth in Q3 and also reiterated higher EBIT per parcel versus peers, supported by its economies of scale and better service quality, though volume guidance for 2022 was lowered due to the disruptions, the analyst wrote in a research note.
According to the third quarter database of Insider Monkey, 24 hedge funds were long ZTO Express (Cayman) Inc. (NYSE:ZTO), compared to 17 funds in the prior quarter. Kerr Neilson’s Platinum Asset Management is the largest stakeholder of the company, with nearly 16 million shares worth $382.4 million.
H World Group Limited (NASDAQ:HTHT) is one of the best Chinese stocks to monitor. It is a Shanghai-based company that develops leased, owned, and franchised hotels primarily in the People's Republic of China. On October 25, H World Group Limited (NASDAQ:HTHT) reported that third quarter's revenue per available room (RevPAR) rebounded to 90% of the 2019 level in Legacy-Huazhu business due to the pent-up leisure traveling demand in the summer holidays.
On October 27, Daiwa analyst Carlton Lai upgraded H World Group Limited (NASDAQ:HTHT) to Buy from Outperform with a price target of $34, down from $43. The analyst sees a "compelling valuation" after the latest share price correction. He believes the present share price reflects limited improvement in China's 2023 RevPAR, but his base case remains that China will see a gradual reopening beginning in mid-2023.
According to Insider Monkey’s data, 29 hedge funds were bullish on H World Group Limited (NASDAQ:HTHT) at the end of September 2022, compared to 30 funds in the prior quarter.
KE Holdings Inc. (NYSE:BEKE) is a Beijing-based company that focuses on operating an integrated online and offline platform for housing transactions and services in the People's Republic of China. The company operates through three segments – Existing Home Transaction Services, New Home Transaction Services, and Emerging and Other Services.
On October 28, investment advisory Barclays raised the firm's price target on the shares to $27 from $26 and kept an Overweight rating on the shares. Analyst Jiong Shao issued the ratings update.
According to Insider Monkey’s Q3 data, 41 hedge funds were long KE Holdings Inc. (NYSE:BEKE), compared to 37 funds in the prior quarter. The collective stakes in Q3 increased to $1.65 billion from $1.62 billion in Q2 2022.
In addition to Alibaba Group Holding Limited (NYSE:BABA), JD.com, Inc. (NASDAQ:JD), and Pinduoduo Inc. (NASDAQ:PDD), KE Holdings Inc. (NYSE:BEKE) is one of the most significant Chinese stocks to buy and hold for next year.
Here is what Tao Value has to say about KE Holdings Inc. (NYSE:BEKE) in its Q3 2021 investor letter:
“As witnessed in the past quarter, the government intervention in the Chinese private sector is elevated to an unprecedented level. Given this background, I thoroughly reviewed all our Chinese holdings and made a few changes. We exited KE holdings (ticker: BEKE), for high potential regulatory risk and the passing of the visionary founder & CEO Zuo Hui (who was a core tenet of our original thesis).”
