The Best Chinese Stocks to Buy and Hold

The following is an excerpt from The 10 Best Chinese Stocks You Can Buy.

This a precarious time to be investing in China. But many Chinese stocks, particularly in the technology and service sectors, look attractive if you’re willing to deal with some volatility.

Even before the coronavirus outbreak, which originated in Wuhan province, relations between China and the West were strained. The U.S. and China have been engaged in a tit-for-tat trade war for most of the Trump presidency, and there is widespread fear in Western capitals that 5G telecom equipment manufactured by Huawei is capable of state espionage.

Trade tensions alone were reason enough to make many investors wary of Chinese stocks. Then the COVID-19 pandemic happened, exposing the risks of a globalized supply chain.

Consider Apple (AAPL). The world’s leading consumer electronics maker has been reporting supply disruptions since February stemming from Chinese factory closures, and JPMorgan recently estimated that the launch of the new iPhone, which usually comes out in September or October, might be delayed by a few months.

Going forward, a lot of companies might be reconsidering the merits of cheap Chinese manufacturing and opt to stay closer to home. But the truth is that China has long evolved past the smokestack stage of development. The country is a major technology and digital entertainment hub, even if the vast majority of its products and services are destined for domestic use.

You have to be careful when investing in Chinese stocks, as shareholder protections aren’t quite up to Western standards. Already this year, major accounting scandals have upended iQIYI (IQ) and Luckin Coffee (LK). But that’s a risk you take when you invest in emerging markets, and that’s why it’s important to diversify and avoid heavy concentration in any single stock.

Here are 10 of the best Chinese stocks on the market right now. Each is poised to do well no matter what happens next in the coronavirus and trade war sagas.

ZTO Express

If you like the idea of owning China’s Amazon, it only makes sense that you would also like the country’s version of United Parcel Service (UPS). Greater demand for e-commerce means greater demand for shipping and delivery services. It really is that simple.

This brings us to ZTO Express (ZTO), the largest player in Chinese express parcel delivery with a market share of 19.1% as of last year. The company has a fleet of more than 7,350 line-haul vehicles serving approximately 30,000 pick-up and delivery centers throughout China.

Like many Chinese stocks over the past few years, ZTO’s growth rates boggle the mind. Parcel volume jumped by 42% last year after jumping by 37% and 38% in 2018 and 2017, respectively. First-quarter 2020 volume figures aren’t available yet, but it’s likely that widespread lockdowns only made ZTO’s services all the more essential. Just understand ZTO might see activity similar to UPS in which a shift in consumer and product mix hamper profits in the short term.

China probably will record its first true recession in decades this year, but you’d never know it by looking at ZTO’s stock price. The shares have continued to push higher all year and are currently at all-time highs.

We don’t know a lot about what comes next in the post-coronavirus world. But it’s safe to assume that in any reality, ZTO and its peers deliver more parcels.

To read the rest of the article, see The 10 Best Chinese Stocks You Can Buy.

This article first appeared on Sizemore Insights as The Best Chinese Stocks to Buy and Hold

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