China’s recent economic slowdown and stock market troubles are forcing investors to decide between joining the wall of worries or brushing aside the concerns.
The Shanghai composite (000001.SS), the country’s main stock index, sank 35% after soaring more than 150% in nearly a year. In an effort to stop the bleeding, the Chinese government implemented a series of restrictions, including a ban on new initial public offerings.
The recent drop is a buying opportunity for Chinese shares traded in the American marketplace, according to Gene Munster, senior research analyst at Piper Jaffray.
He sees internet giant Baidu (BIDU) as one such play. His firm rates the stock an "overweight" with a price target of $230 a share.
“Baidu is the Google (GOOGL) of China," said Munster. "It’s the gold standard of internet companies in China."
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The analyst said it’s “a great opportunity, they have so many different levers they can pull over the long term...for long term investors, we think this is a great story to own.”
Baidu reports earnings after Monday’s close and Munster expects a very similar message as Google’s earnings report.
“Greater expense controls -- that’s going to be the key focus,” he said. “It’s less about the June quarter and more about the expectations and commentary around” improving margins over time, overall economy and the health of the advertisers.
Munster also has JD.com (JD) on his radar. "Another great story, and they’re obviously taking a more hands on approach to e-commerce, similar to Amazon (AMZN) in the U.S.,” he said
Piper Jaffray rates JD.com an "equal weight" and set the price target at $32 a share.
But if the analyst had to choose just one Chinese stock to own, “we’d pick Baidu over JD...it's just part of the oxygen running China’s internet.”
