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China Stocks Likely to Generate Better Returns in 2021: 5 Picks

Tirthankar Chakraborty
·6 min read

It’s been a tumultuous year for stocks as economies across the globe were ravaged by the coronavirus outbreak. Shut-down measures to curb the spread of the virus hampered economic activities, impacted corporate profits and resulted in a lot gyration among stocks worldwide.

But as the year comes to an end, interestingly, China onshore stocks in particular performed significantly well. This is primarily because its economy quickly recouped from the impact of the coronavirus pandemic during the earlier part of the year, thanks to Beijing’s initiative to restore industrial output and overall businesses as early as in the second quarter.

The world’s second-largest economy is presently on a strong footing, with its industrial production, investment and consumer outlays improving at an encouraging pace in the month of November. With the primary economic indicators remaining in good shape, China’s jobs growth is poised to improve, driving down the jobless rate in the near future.

Nonetheless, the country’s industrial production jumped 7% last month compared to a year earlier, its highest level in more than a two-year period, according to China’s National Bureau of Statistics, as quoted in a Wall Street Journal article. October’s output was also commendable, up 6.9% year over year.

It’s worth pointing out that solid industrial production in the previous two months squashed concerns that the resurgence of the coronavirus or a second wave can encumber China’s manufacturing activity. Notably, the manufacturing sector expanded on overseas demand for made-in-China products. After all, most of the economies across the world were crippled by the pandemic and had to rely on China exports.

By the way, the Wall Street Journal further stated that data from the National Bureau of Statistics showed China’s investment in fixed assets, including manufacturing and infrastructure projects increasing a healthy 2.6% from January to November compared to the same period last year.

At the same time, China’s recovery broadened after a key indicator of consumer spending – retail sales – grew 5% year over year in November, registering its fourth consecutive month of expansion, as mentioned in a South China Morning Post article.

No doubt, China’s economic growth in the fourth quarter should accelerate at a faster-than-anticipated pace on such stellar production and outlay numbers. Lest we forget, China’s GDP had expanded at a superb 4.9% year over year in the third quarter. It’s a noteworthy rebound given that economic growth came to a screeching halt in the first quarter, with GDP contracting 6.8%, the Wall Street Journal further noted.

What’s more, global investors are now betting that China’s economy will do even better next year. A much-needed breakthrough on the coronavirus vaccine front has given enough assurance that not just in China but globally, economic activities will pick up. Along with world economic recovery, many opine that the Sino-US trade relationship will improve as well.

Thus, the bull run among China stocks is expected to last next year as well, leading many analysts to stay overweight on such equities. For instance, as quoted in a livemint article, Goldman Sachs expects a bounce back in China corporate profits next year and said that “China will deliver one of the strongest and fastest macro recoveries in 2021 among major economies globally.”

The article further stated that Morgan Stanley expects China stocks to post “solid” earnings growth next year on broad-based economic recovery.

China Stocks to Continue Bull Run in 2021: 5 Picks

It’s quite evident that China’s economy recovered pretty early from the coronavirus onslaught this year, with production and spending improving handsomely. To top it, China’s economy vis-à-vis its stock market is headed for strong growth next year on global rollout of coronavirus vaccine and predictable US-China ties. Thus, it’s judicious for investors to focus on China stocks for stellar returns in 2021. Here’re the top five picks –

China Petroleum & Chemical Corporation SNP is one of the largest petroleum and petrochemical companies in Asia. The company currently has a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for its next-year earnings has risen 54.8% over the past 60 days. The company’s expected earnings growth rate for next year is 25.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Baidu, Inc. BIDU is a Chinese-language Internet search provider and is based in Beijing, the People's Republic of China. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its next-year earnings has moved up 4.7% over the past 60 days. The company’s expected earnings growth rate for the next year is nearly 11%.

Want Want China Holdings Ltd. WWNTY is engaged in the manufacturing and distribution of food and beverages. The company currently has a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its next-year earnings has climbed 10.6% over the past 90 days. The company’s expected earnings growth rate for the next year is 5.8%.

Tencent Holding Ltd. TCEHY provides value-added Internet, mobile and telecom services and online advertising. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its next-year earnings has moved 4.8% up over the past 60 days. The company’s expected earnings growth rate for the next year is 25.1%.

Noah Holdings Ltd. NOAH is engaged in providing independent services, primarily comprising distribution of wealth management products to the high-net-worth population in China. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its next-year earnings has risen 4.2% over the past 60 days. The company’s expected earnings growth rate for the next year is 21.1%.

Zacks Names “Single Best Pick to Double”

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.

Free: See Our Top Stock and 4 Runners Up >>


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Baidu, Inc. (BIDU) : Free Stock Analysis Report
 
China Petroleum & Chemical Corporation (SNP) : Free Stock Analysis Report
 
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Noah Holdings Ltd. (NOAH) : Free Stock Analysis Report
 
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