Alibaba Stock Boosts Top China Play Near Buy Point; Nio Stock Surges

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Alibaba (BABA) stock is recovering from a tough Christmas week as the e-tail giant helps boost a top China fund near a buy point.


The $6.3 billion iShares MSCI China ETF (MCHI) tracks the MSCI China Index, which provides exposure to large and midsize companies in China. MCHI will mark its 10th anniversary in March.

Consumer discretionary companies accounted for just over 35% of total assets as of Wednesday, communications 20%, financials 14%, and information technology and health care about 6% each. Smaller positions in consumer staples, industrials, real estate, materials, utilities and energy made up the rest.

Alibaba Group (BABA), Tencent Holdings (TCEHY), online shopping platform Meituan, (JD) and China Construction Bank, the top five holdings, represented about 37% of the 604-stock portfolio.

Alibaba, which holds a 33% stake in Ant Group, soared more than 6% Wednesday in heavy trade. The e-commerce leader indicated it’s making progress in overhauling online finance giant Ant to satisfy China regulators. Ant operates a suite of financial products, including the widely used Alipay digital wallet in China.

Alibaba stock dived 13% Dec. 24 on news the Chinese government was launching an anti-monopoly probe. It’s up 12% year to date through Wednesday’s close.

Internet content giant Tencent is also recouping losses from a Dec. 24 sympathy drop. Shares are about 12% off their November peak but are still up nearly 50% this year.

Nio Stock Drives Big Gains has surged over 150% this year. It’s getting close to a 92.87 buy point of a shallow base, according to MarketSmith chart analysis. IBD Stock Checkup assigns the online retailer a highest-possible 99 Composite Rating based on key growth traits. That puts it among the leaders in the 42-stock internet retail group.

But that’s not all. Other U.S.-listed Chinese companies in MCHI’s top 10 include Pinduoduo (PDD), Nio (NIO) and Baidu (BIDU). They are small positions at about 2% apiece, yet are big performers.

Mobile e-commerce platform Pinduoduo has rallied more than 370% this year. Electric-vehicle maker Nio stock has surged over 1,100%. Baidu is up about 74%.

Needless to say, all three stocks are far extended from their last buy points. But the iShares MSCI China ETF is about 4% away from an 84.82 buy point of a flat base. Going into Thursday, it returned 26% year to date, well ahead of the S&P 500’s 16% gain. The fund has a 0.59% expense ratio.

Its average annual return over the past three and five years are a respective 7.4% and 13.5%, according to Morningstar Inc. SPDR S&P 500 (SPY) returned 13.8% and 14.6% over the same periods.

Follow Nancy Gondo on Twitter at @IBD_NGondo


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