Major Chinese stocks such as Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU), and JD (NASDAQ:JD) plunged in today’s early trading session as confidence waned that a rally could sustain the country’s financial markets.
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A Multi-Faceted Problem
The stock plunge comes after China’s exports dropped by 7.5% in March. The export slump dashed hopes that slower domestic demand would be offset by an uptick in sales in international markets. The country’s trade surplus contracted to $58.55 billion from $78.43 billion a year ago.
China aims to grow its economy by nearly 5% this year. However, a 1.9% decline in its March imports points to a weak consumer appetite for spending. China is still reeling from a massive slump in its real estate market. The troubles at top real estate players such as China Evergrande Group (HK:6666) (OTC:EGNRQ) have left a large number of would-be homeowners in years-long limbo.
U.S.-China Competition Exacerbates the Situation
Additionally, the competition between China and the U.S. for economic and technological dominance is weighing on investor sentiment. The U.S. is seeking to steadily tighten its tech curbs on China. China, on its part, is looking to reduce its technological reliance on the U.S.
So far, China has urged its electric vehicle producers to increasingly opt for domestically produced chips and asked its telecom carriers to replace foreign chips in their core networks. In the latest, U.S. air carriers are looking to curb flight frequencies to China citing anti-competitive policies in the country.
Chinese authorities are looking to strengthen the country’s financial markets with a push for improved corporate governance. However, confidence is in short supply at present. One-time investor favorites such as Alibaba and Baidu are down in the double digits over the past year.
Which Is the Best Chinese Stock to Buy Now?
While analysts see scope for significant stock price appreciation in the stocks on our list today, the TipRanks Stock Comparison tool indicates the highest potential upside of 55.2% in NIO (NYSE:NIO) shares over the coming 12 months.
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