The world’s most-populous nation and the second-largest economy with a booming urban middle class and buzzing entrepreneurial activity, China has come a long way ever since it began to open up and reform its economy back in 1978. Since then, GDP (gross domestic product) growth has averaged almost 10% a year, while more than 800 million people have been lifted out of poverty. With the majority of tags, labels and stickers on products and goods of all sorts sporting ‘Made in China’, the country has become known as the world’s factory. But beyond its low labour costs, its strong business ecosystem, lack of regulatory compliance, low taxes and competitive currency practices, have boosted its standout economy.
The only major economy to achieve positive growth in 2020, China’s recovery from COVID-19 has been swift so far. Thanks to the containment of the outbreak coupled with support from financial and fiscal policies and resilient exports, China recorded 2.3% real GDP growth in 2020, while according to the country’s National Bureau of Statistics, its GDP increased by a record 18.3% in the first quarter of 2021 in comparison to the same period last year.
With the economy expected to roar back to pre-pandemic levels and the Chinese stock market having been a long-standing investment opportunity for many investors, we’ve rounded up the top-performing Chinese stocks that have excelled in the past year and are expected to do so in the future.
What is the Chinese stock market called?
The Shanghai Stock Exchange (SSE) is one of the two stock exchanges operating independently in mainland China. The world’s fourth largest stock market by market capitalisation, the exchange dates back to 1891 when during the boom in mining shares, foreign businessmen founded the Shanghai Sharebrokers Association. Re-established in 1990, today it is a non-profit organisation directly administered by the China Securities Regulatory Commission (CSRC). In fact, unlike the Hong Kong Stock Exchange, the SSE is still not entirely open to foreign investors, while it is often affected by decisions of the central government due to capital account controls exercised by the Chinese mainland authorities.
The other stock exchange operating independently in mainland China is the Shenzhen Stocks Exchange. Founded in 1990, seven years later the State Council of China decided that the stock exchange would be directly managed by the CSRC. Situated in the Futian district of Shenzhen, it is the fourth largest in East Asia. In 2009, the ChiNext market was inaugurated, with many of the companies traded being subsidiaries of firms in which the Chinese government maintains controlling interest.
Both the Shanghai Stock Exchange and the Shenzhen Stock Exchange are open Monday through Friday from 9:30am to 11:30am and 1:00pm to 3:00pm China Standard Time (GMT+08:00).
Top Chinese stocks
Tencent Holdings Ltd. (700)
A sprawling conglomerate that is often dubbed China’s Berkshire Hathaway, Tencent was founded in 1998 and together with its subsidiaries it markets various Internet-related services and products for a range of sectors, such as entertainment, artificial intelligence (AI) and others. Although best-known for its WeChat product, the country’s most popular app and a necessity to many Chinese, video games are what have been generating most of Tencent’s revenue and profits. In 2018, the company surpassed a market value of $500 billion, becoming the first Asian tech company to cross this valuation mark. Since then, it has cemented its position even further, emerging as the most valuable publicly traded company in the country.
The Chinese Internet services giant reported a total annual revenue of over CN¥482 billion (about $73.9 billion), marking a 28% increase compared to the previous year. What precisely has been behind Tencent’s revenue numbers? For one, the pandemic has been good to gaming companies like Tencent itself, owner of blockbuster hits like Honour of Kings and League of Legends, amongst others. As 2020 progressed, its gaming revenue climbed from 31% in Q1 to 40% in Q2 and 45% in Q3, before inching down to 29% for the fourth quarter. However, for the whole year, its gaming revenue surged 36%, compared to the measly 10% for all of 2019. And in 2021, the company managed to grow by a further 17% in the first quarter, to $6.7 billion.
As the company is in full pursuit of a so-called global gaming domination, Tencent has also ramped up its deal making, utilising its ample cash flows to invest in other high-growth technology businesses. As recently as June 30, it launched a new studio named Uncapped Games, which will be focusing on real-time strategy (RTS) games, while the aim is to tramp strong ‘90s franchises like StarCraft, Age of Empires and Command and Conquer. What’s more, by taking minority stakes in winning companies like Pinduoduo, Sea Limited and even Tesla, its equity investee portfolio is constantly growing.
To add Tencent (700) to your portfolio, head over to Moneybase Invest.
Alibaba Group Holding Limited (BABA)
Originally founded in 1999 as a B2B eCommerce portal with the aim to bring together Chinese manufacturers with overseas buyers, in 2003 the service expanded to include the C2C eCommerce marketplace Taobao, while five years later it launched Tmall, a B2C online commerce platform centred on brands and online retail. Then, in 2010, the company launched AliExpress.com, the much-loved online retail servi