3 China Stocks Set for Recovery Before 2023 Ends

Finding undervalued Chinese stocks is not a daunting task, given that many of them have experienced significant declines in their share prices.

The real challenge lies in identifying Chinese stocks that are not only on the path to recovery in terms of their share prices but are also at an early stage of that recovery, leaving room for further gains.

Here are three such stocks we've identified:

#1 Xiaomi (SEHK:1810)

Xiaomi has recently gained momentum for two key reasons:

Firstly, its smartphone sales have performed exceptionally well. According to Counterpoint's data, Xiaomi, alongside OPPO, is among the only two companies that have managed to sell more handsets in 3Q2023 compared to a year ago. This success can be attributed to weaker-than-expected demand for the iPhone 15 in China, which has benefitted these Chinese brands.

Secondly, Xiaomi is gearing up to launch its first electric vehicle (EV), a sports sedan named Xiaomi SU7, with mass production scheduled to commence in December 2023 and deliveries starting in February 2024. Xiaomi is collaborating with BJEV, the electric vehicle unit of the Chinese state-owned automaker BAIC, to manufacture these vehicles.

These developments have bolstered Xiaomi's reputation, demonstrating its potential as a major player in the smartphone industry while showcasing its ability to innovate rapidly in the EV market.

However, the success of the EVs remains uncertain. Still, investors have shown enthusiasm, making this a "buy the rumor and sell the fact" opportunity where one can capitalize on the hype and consider selling once the cars are officially produced and delivered.

From a chart perspective, Xiaomi's share price has showed a significant decline followed by a consolidation phase and now a subsequent recovery.

Currently, Xiaomi's share price is on an uptrend, having climbed from HK$12 to HK$16 in just one month. It would be prudent to await a pullback before considering entry, with a potential profit target around HK$20.55 or upon the official launch of the EV.