Bargain hunting for stocks in China

Select growth stocks tied to one of the world’s largest and fastest-growing economies could be on sale.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Print

Stocks of companies in mainland China have meaningfully lagged those in the U.S., Taiwan, and Hong Kong through the first nine months of 2021, partly influenced by China’s tighter monetary policy, as well as rising regulatory and geopolitical risk. Given what’s been a significant pullback, Fidelity’s Ivan Xie says he’s seeing select growth stocks in the country at attractive prices.

“Our team has found reasonable stock valuations and improved risk-reward profiles for long-duration growth names, and we’re excited about recent opportunities,” says Xie, co-manager of Fidelity® China Region Fund (FHKCX).

Xie and co-managers Stephen Lieu and Peifang Sun seek high-quality growth stocks at reasonable valuations as well as cyclical stocks at cheap valuations. They say they have found some “great” opportunities in the former category in recent months.

China’s economy is increasingly known for its new-economy sectors, says Xie, who cites Meituan (MPNGF) as a domestically oriented company that is taking advantage of mega-trends in the country.

Meituan is a dominant local-services provider that hooks up locals with everything from food delivery to spa services and hotel bookings, Xie says. The stock trended generally lower early in 2021, due to losses related to expanding its community group-buying services. Yet Xie believes the company could succeed longer term, and accumulated shares on price weakness.

The fund also invested in Zai Lab (ZLAB), a biotechnology company that’s working on treatments for autoimmune ailments, infectious diseases, and cancer. Xie says the company’s management team continues to execute well by signing attractive licensing deals for drugs it can bring to market in China, while also developing in-house drugs.

Lastly, Xie and team raised their stake in Pinduoduo (PDD), which they consider one of the leading e-commerce players in China, with dominant positions in lower-tier cities in the country. The company takes part in the community group-buying trend in China, which got its start amid the pandemic and remains popular, according to Xie.

“We’re finding many innovative, fast-growing e-commerce, tech, and biotech stories in China with solid business models and access to huge local markets that are trading at surprisingly fair prices,” Xie says.

Fidelity® China Region Fund held securities mentioned in this article as of August 31. For specific fund information, including full holdings, please click on the fund trading symbol above.

Next steps to consider



Find stocks


Match ideas with potential investments using our Stock Screener.



5-step guide to trading


Learn what you need to know before trading the market.

A collection of current insights from our portfolio managers.

  • Facebook.
  • Twitter.
  • LinkedIn.
  • Print
Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.
Investing involves risk, including risk of loss.
Diversification does not ensure a profit or guarantee against loss.
Sector funds can be more volatile because of their narrow concentration in a specific industry. Growth stocks can perform differently from other types of stocks and the market as a whole and can be more volatile than other types of stocks. Value stocks can perform differently than other types of stocks and can continue to be undervalued by the market for long periods of time. • Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. • Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging markets. • In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation, credit, and default risks for both issuers and counterparties. • Lower-quality bonds can be more volatile and have greater risk of default than higher-quality bonds. • The municipal market is volatile and can be significantly affected by adverse tax, legislative, or political changes, and the financial condition of the issuers of municipal securities. • The securities of smaller, less well-known companies can be more volatile than those of larger companies. • The funds can invest in securities that may have a leveraging effect (such as derivatives and forward-settling securities) that may increase market exposure, magnify investment risks, and cause losses to be realized more quickly. • Leverage can magnify the impact of adverse issuer, political, regulatory, market, or economic developments on a company. In the event of bankruptcy, a company’s creditors take precedence over the company’s stockholders. Although the companies that the fund invests in may be highly leveraged, the fund itself does not use leverage as an investment strategy. Changes in real estate values or economic downturns can have a significant negative effect on issuers in the real estate industry. In the event of bankruptcy, a company’s creditors take precedence over the company’s stockholders. Third-party marks are the property of their respective owners; all other marks are the property of FMR LLC.

As with all your investments through Fidelity, you must make your own determination whether an investment in any particular security or securities is consistent with your investment objectives, risk tolerance, financial situation, and evaluation of the security. Fidelity is not recommending or endorsing this investment by making it available to its customers.

Past performance is no guarantee of future results.

Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

999311.1.0
close
Please enter a valid e-mail address
Please enter a valid e-mail address
Important legal information about the e-mail you will be sending. By using this service, you agree to input your real e-mail address and only send it to people you know. It is a violation of law in some jurisdictions to falsely identify yourself in an e-mail. All information you provide will be used by Fidelity solely for the purpose of sending the e-mail on your behalf.The subject line of the e-mail you send will be "Fidelity.com: "

Your e-mail has been sent.
close

Your e-mail has been sent.